Matthew McDermott, Head of Digital Assets at Goldman Sachs, anticipates substantial growth in the digital assets market, fueled by expanding blockchain applications and increased participation from traditional financial institutions.

Evolution of the Digital Assets Market

In an interview with FOX Business, McDermott shared insights into the evolving landscape of digital assets, foreseeing significant advancements in the coming year. He attributes this growth to the commercial applications of blockchain technology and supportive regulatory measures.

Traditional Financial Institutions Join the Crypto Space

McDermott notes a transformative trend with traditional financial institutions increasingly entering the digital assets space over the past 12 to 18 months. He views this participation as a pivotal development laying the foundation for further industry expansion.

Spot Crypto ETFs and Gradual Transformation

While the anticipation for spot crypto ETF approval is high, McDermott cautions against expecting an immediate transformation. He envisions a gradual shift in the digital assets landscape in the coming year, contingent on regulatory approval. Over a dozen firms, including BlackRock and Fidelity, await SEC approval for spot Bitcoin ETFs.

Tokenization Use Case and Marketplace Development

McDermott emphasizes the tokenization use case, predicting the development of marketplaces around this concept in the coming year. He anticipates increased adoption, particularly on the buy side, with the emergence of secondary liquidity on the blockchain as a key enabler.

Earlier this year, Goldman Sachs launched its tokenization platform, GS DAP, showcasing its efficiency in reducing settlement time. McDermott envisions broader applications for GS DAP, including alternatives, fund units, derivatives, and private equity.

Impact of Spot ETF Approval on Institutional Participation

Looking ahead, McDermott anticipates the approval of spot ETFs for Bitcoin and Ethereum in early 2024, significantly impacting institutional investor participation. While institutions may not directly invest in underlying assets, he expects increased market liquidity and the creation of tradable institutional products without direct handling of the assets.

As the digital assets landscape continues to evolve, McDermott’s insights shed light on the transformative journey ahead, with traditional finance and blockchain technology converging for sustained growth.