Goldman Sachs digital asset head says crypto rally driven by retail investors

"The price action has still been driven by retails primarily. But it's the institutions that we've started to see come in," McDermott said, speaking at the Digital Summit (DAS) conference in London. "You really see now the appetite is transformed."

Goldman Sachs launched a crypto trading desk in 2021 and is continuing to build on it, McDermott said.

"Last year was tough but just coming through to this year we've seen a big sea-change not only in terms of the types of clients but also in terms of volumes," he said.

No one knows for sure what is driving bitcoin's latest gains, although analysts point to billions of dollars that have flowed into U.S. spot bitcoin ETFs which launched this year. McDermott said that the ETFs prompted a "psychological shift".

The bitcoin rally has cooled slightly in recent days, along with other riskier assets, after a series of U.S. data releases that suggested the Federal Reserve may not cut interest rates this year as much as previously expected.

Regulators have long warned that bitcoin is a high-risk asset, with limited real-world use cases.

Cryptocurrencies surged during 2020 and 2021, when ultra-low interest rates helped drive speculative investment.

The pandemic-era boom was followed by a sharp plunge in 2022, when a string of bankruptcies and failures at the biggest crypto firms, including FTX, wiped $2 trillion off the crypto market and left millions of investors out of pocket.

McDermott said there was "a certain component of in the system" but not the same "hyperbole" as during 2021 and 2022.