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Goldman Sachs: “Bitcoin Is Likely To Decline Even Further”

Many cryptocurrency proponents eagerly await the arrival of institutional interest, as a surge of capital will push this industry to new heights, in terms of price and innovation. As has been the common theme over the past months, institutions from legacy markets are finally starting to take notice of this promising asset class.

In mid-December, amidst the peak of the most Bitcoin “mania,” Goldman Sachs, one of the most respected firms on Wall Street, revealed that it was apparently in the process of creating a cryptocurrency trading desk. The cryptocurrency market reacted in kind to this news, with many expecting that this would be the single catalyst that would bring worldwide legitimacy to this often-controversial market.

However, as per a recent Business Insider article, Goldman Sachs has seemingly had a rather substantial sentiment shift, with the firm’s investment strategy group not expecting for Bitcoin to do well moving into the future.

In the investment giant’s midyear economic-outlook report, the aforementioned team at Goldman said that Bitcoin is likely to decline even further this year, while not giving an explicit price prediction. Sharmin Mossavar-Rahamani, a Chief Investment Officer at Goldman, said the following on the matter:

“Our view that cryptocurrencies would not retain value in their current incarnation remains intact and, in fact, has been borne out much sooner than we expected.”

While this sounds like an overall bearish statement, the inclusion of “current,” potentially indicates that future iterations of cryptocurrencies could see fit in the eyes of Goldman Sachs’ investment team. Sharmin later noted that cryptocurrencies, specifically Bitcoin, do not fulfill the prerequisites required to be classified as a currency. The executive added:

“We expect further declines in the future given our view that these cryptocurrencies do not fulfill any of the three traditional roles of a currency: they are neither a medium of exchange, nor a unit of measurement, nor a store of value.”

This has been a common criticism made by well-known names in traditional sectors, with this being their primary qualm against this emerging breed of assets. What these critics tend to forget to point out, is that cryptocurrencies, or crypto assets or some now call them, have a potential for real-world utility.

The report went on to point out that further declines in cryptocurrency will not affect macro markets, as this industry represents just 0.3% of the world’s GDP at the time of writing. Further drawing attention to this figure, it was noted that Goldman believes that “they garner far more traditional media and social media attention than is warranted.”

Goldman Isn’t “A Monolithic Company With Only One Opinion”

These statements came to the surprise of many, as the New York-based firm has historically shown interest in offering cryptocurrency trading solutions and services.

In May, Ethereum World News reported that Goldman was going to start trading Bitcoin futures on behalf of its worldwide clientele. Additionally, the investment bank has held a stake in Circle, a now prominent trading service for institutional and retail investors alike. These investments and plans have led some to believe that this is an unwarranted “FUD” campaign. A user by the name of CaribbeanCoins wrote:

“What a bunch of manipulators. They know very well how to create FUD and take advantage of it to accumulate always more. They also know very well that the crypto will not disappear, too many issues now. These are the crooks of modern times! Shame on them.”

Despite the fears of market manipulation, Nathaniel Popper, the author of Digital Gold and a well-known fintech journalist at the New York Times, fittingly pointed out that this is only the sentiment held by one segment of the firm. Within complex corporate structures of thousands of employees, it becomes only a matter of time before conflicting opinions arise and clash with one another.

Taking a deeper look at these statements, it has become increasingly apparent that this sentiment is not seen across the board at Goldman Sachs.

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Bitcoin, More Like ‘Bitcon’ Will Soon Become Zero, Says Economics Professor

Another ‘nocoiner’ academic has lent his voice to the Bitcoin doomsday FUD, calling Bitcoin a “con.” Since the emergence of cryptocurrency into the public sphere, there has been no shortage of critics and unbelievers. From Warren Buffett to Charlie Munger, and even Bill Gates, numerous notable figures in the global business scene have thrashed virtual currencies.

Bitcoin Has No Fundamental Value

Gary Smith, an Economics professor at Pomona College, says that Bitcoin has no fundamental value. Berkshire Hathaway chief, Warren Buffett have made this same argument. Smith contends that as an investment, Bitcoin is a “bitcon.” The Econ professor based his declaration as follows:

The fundamental value of an investment is the amount you would be willing to pay to hold it forever and be satisfied by the cash it generates. Businesses that make profits have investment value. Bitcoins generate no cash and have no investment value. No sane person would buy bitcoins and say, ‘This is a great investment. I will never sell my bitcoins because I am happy just owning them.’

Smith sounds like someone who probably bought Bitcoin during the December 2017 high. There are many investors (hodlers) who have realized the long-term investment potential of the top-ranked cryptocurrency and have held on to their BTC for long. Permabulls like the Winklevoss twins and Tim Draper come to mind.

Smith makes another inaccurate assessment in his analysis when he says that BTC is not attractive when the price is in decline, unlike “real investments.” The reverse is the case. BTC is most attractive when prices find a new floor, it is called “buying the dip.” Bitcoin goes through repeated cycles on boom and bust. Anyone familiar with its history knows that 70 percent peak to trough dips aren’t new in the BTC market.

Bitcoin is a Modern Day ‘Nitvender’

After failing to make a convincing argument for the lack of value argument, Smith dredges up the bubble rhetoric, another battered Bitcoin criticism. He compares the top-ranked crypto to the usual suspects like the Tulipmania, the dot-com bubble, and curiously, the South Sea Bubble. In what is a reference to the South Sea Bubble, Smith called Bitcoin the modern-day ‘nitvender.’

What makes the South Sea Bubble particularly interesting is that it encompasses multiple waves of scam offerings that were popular in 16th-century Britain. Sir Isaac Newton famously fell victim for one of the scams, losing £20,000 in the process. Smith argues that the price of Bitcoin has no basis in any economic fundamentals just like the South sea nitvender.

Smith ignores the finite amount of the total Bitcoin supply in his zero-sum crypto Armageddon. BTC is also divisible up to eight decimal points meaning there are ten million place values to which economic value can be assigned depending on the total market cap when all 21 million BTC have been mined.

The truth is that folks like Smith fail to understand that tokenomics don’t bend to the crooked scales of mainstream economics. Mathematically speaking, BTC isn’t a zero-sum game; thus, it isn’t a Ponzi scheme.

Do you agree with Gary Smith’s analysis or is he another ‘nocoiner’ who is ignorant of how Bitcoin works? Keep the conversation going in the comment section below.

Image courtesy of Coinmarketcap.

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