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Goldman Sachs Hunting For Bargain Crypto Firms after FTX Debacle

Mathew McDermott, Goldman's head of digital assets, recently commented that, FTX's implosion has amplified the need for trustworthy, regulated cryptocurrency players, and big banks see an opportunity to pick up distressed businesses. 

This opportunity has led to decision at Goldman Sachs to spend tens of millions of dollars to buy or invest in crypto companies, after the collapse of the FTX exchange hit crypto startup valuations and lowered investor interest.

"We do see some really interesting opportunities, priced much more sensibly," McDermott said in an interview. He Continued to state, "It's definitely set the market back in terms of sentiment, there's absolutely no doubt of that. FTX was a poster child in many parts of the ecosystem. But to reiterate, the underlying technology continues to perform."

According to data site CoinMarketCap, the global cryptocurrency market had peaked in 2021, reaching around $2.9 Trillion. Since then, the crypto market has shed about $2 trillion this year as central banks tightened credit and a string of high-profile corporate failures hit. Currently, it stands circa $865 billion as for Dec 5th, 2022. As a distressed market, still having an addressable market close to a trillion, other firms also see an opportunity to capture market share. 

Financial institutions like BNY Mellon and Nasdaq are now providing crypto related services. Binance, an early investor in FTX and a competitor, has suggested buying banks to integrated traditional and non-traditional financial offering for customers. Both Visa and Mastercard have either made investments or crafted partnerships to support and provide crypto related offerings.

There still remain some skeptics, who are not fully onboard with crypto:

"I don't think it's a fad or going away, but I can't put an intrinsic value on it," Morgan Stanley CEO James Gorman said at the Reuters NEXT conference on Dec. 1.

HSBC CEO Noel Quinn, meanwhile, told a banking conference in London last week he has no plans to expand into crypto trading or investing for retail customers.

Even the CEO of Goldman has mixed feelings, David Solomon told CNBC, he views cryptocurrencies as "highly speculative", but he also sees potential in the underlying technology as its infrastructure becomes more formalized.

Goldman is doing due diligence on a number of different crypto firms, McDermott has suggested, but did not provide details. His team has grow to more than 70 people, including a seven-strong crypto options and derivatives trading desk. The firm is also building its own private distributed ledger technology, McDermott said.