LONDON (Reuters) -The recent surge in cryptocurrency prices has been driven by retail investors, but institutions are starting to join in, Goldman Sachs' head of digital assets Mathew McDermott said on Tuesday.

Bitcoin, the biggest cryptocurrency, hit an all-time high of $73,794 last week and has gained 50% so far this year, pulling other crypto prices along with it.

"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 Asset 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.

BANKRUPTCY CLAIMS

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 also said the bank had been "looking at the bankruptcy claims and some of the other investing opportunities," without giving further details.

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

The Goldman executive said there was "a certain component of leverage in the system" currently but not the same "hyperbole" as during 2021 and 2022.

Various banks, including Goldman Sachs, have expressed an interest in crypto's underlying blockchain technology, saying it could be used to trade assets other than cryptocurrencies.

There have been pilot projects to issue blockchain-based versions of traditional financial assets, such as bonds, but there is no routine issuance or liquid secondary market.

"I do think over time we'll start to see more asset classes get tokenised and actually get some scale - but maybe that's one or two years down the line," McDermott said.