Goldman Sachs (NYSE:GS) plans to spend “tens of millions of dollars” on investments into cryptocurrency companies in the wake of the FTX digital asset exchange collapse, according to the bank’s head of digital assets Mathew McDermott.
Speaking to Reuters, McDermott disclosed that the USA-based multinational investment bank is doing due diligence on a number of crypto firms.
"We do see some really interesting opportunities, priced much more sensibly," said McDermott.
In this instance, sensibly priced alludes to severely discounted company valuations in the cryptocurrency sector following FTX’s dramatic, near-instantaneous demise in November.
Once the world’s second-largest crypto exchange, FTX’s stunning failure sent cryptocurrency prices into a tailspin, while a multitude of other exchanges and lenders suffered from market contagion.
Among the worst hit were BlockFi, which was forced into Chapter 11 bankruptcy protection, and Genesis, which is facing at least US$1.8bn in creditor demands.
McDermott did not provide specific target names, but based on Goldman’s previous investment, the bank is likely to target the pick-and-shovels as opposed to more volatile lending protocols.
For instance, Barclays (LON:BARC) and Goldman Sachs (NYSE:GS) joined forces in May on a US$70mln round in Elwood Technologies, a digital asset data platform founded by British hedge fund billionaire Alan Howard.
The firm is also building its own private blockchain platform, McDermott announced.
Regardless of target sub-sectors, it's a shrewd time for Goldman Sachs to step in when struggling firms are facing a wipeout amid a compressed market and dwindling venture capital appetite.
Silicon Valley-based Andreessen Horowitz (a16z), the leading fund for blockchain and crypto investments, reduced its deal value from US$2.3bn in the first quarter of 2022 to US$600mln in the third quarter, spread among just six deals, according to Pitchbook data.
Alameda Research, which was another major seed investor in the crypto space, obviously collapsed in tandem with FTX, drying up that potential funding stream.
"It's definitely set the market back in terms of sentiment, there's absolutely no doubt of that," McDermott said of the collapse, adding: "FTX was a poster child in many parts of the ecosystem. But to reiterate, the underlying technology continues to perform."
Perhaps Goldman's has a few positions spare for the thousands who have been laid off from major crypto firms this year too.