Goldman Sachs Pronounces Bitcoin Dead. Time to Buy?
The incorrigible beasts of Wall Street are at it again, this time with the infamous Vampire Squid, aka Goldman Sachs, commenting that bitcoin is doomed to fail and will likely continue to crash further from its current price point.
Subscribe to the Bitsonline YouTube channel for great videos featuring industry insiders & experts
Goldman Sachs Says Bitcoin Mania Rocks the Boat
In an unusual mid-year update to its 2018 edition of Outlook, entitled ‘(Un)Steady as She Goes’, author and Goldman Sachs Investment Strategy Group’s Chief Investment Officer Sharmin Mossavar-Rahmani labeled bitcoin as presenting “unsteady” mania, writing that Goldman expects it to see “further declines in the future” despite having already fallen from around $20,000 USD to $6,000 over the last seven months.
Their reasoning was the tiresome meme surrounding bitcoin and cryptocurrencies that has been repeated by economists, goldbugs, and Twitter trolls alike: Bitcoin “does not fulfill any of the three traditional roles of a currency: [it is] neither a medium of exchange, nor a unit of measurement, nor a store of value.”
— Max Keiser (@maxkeiser) August 3, 2018
Further to this, and perhaps slipping the boot into the maximalists that have “hodled” through this inevitable bear market, Goldman dismissed the ideas of bitcoin or cryptocurrency growing large enough to be considered a threat to fiat currency, or as disruptive as the amount of press it receives might suggest.
“[further] declines will not negatively impact the performance of broader financial assets, because cryptocurrencies represent just 0.3% of world GDP as of mid-2018…..[i]n fact, we believe that they garner far more traditional media and social media attention than is warranted.”
Premature FUD, Calculated Digression, or Considered Forecast?
Goldman may only be adding another entry to bitcoin’s long list of premature obituaries. It has survived and thrived to this point in time, successfully establishing itself as an alternative asset class. It has overcome what many considered insurmountable: the FUD of mainstream media, establishment economists, powerful governments, and banking institutions determined to maintain their stranglehold on the status quo.
Many bitcoin maximalists will snap back at Goldman Sachs’ identification of the relatively small size of the cryptocurrency industry by asserting that bitcoin is sound money that will one day bring responsibility and accountability back to central banking and government largesse. But it would be prescient to remove emotion and focus on what we can extrapolate from the Goldman report.
If Bitcoin does indeed become one global nongovernmental money, the peace & prosperity it will unleash on the world will be astonishing.
The kind of intellectuals who have propagandized for government money will be universally reviled for eternity.
— Saifedean Ammous (@saifedean) August 3, 2018
Assuming Goldman Sachs is correct and bitcoin is too small to be of any threat to financial stability and will never disrupt the status quo or overthrow the fractional reserve system, then perhaps the question to consider is that if bitcoin is not these things, what enabled it to reach the size it did over the course of the 2017 bull run?
While public sentiment and technological advances obviously contributed, we must consider the possibility that the very system Goldman (and many bitcoin aficionados) thinks bitcoin was trying to destroy, actually fed the cryptocurrency explosion.
Like almost every other risk-on asset class, easy monetary policies have inflated prices considerably. Is it possible that cryptocurrency was an indirect beneficiary of these policies? Extrapolating from this, any continued boom in traditional asset prices may see continued price inflation in the cryptocurrency market.
Goldman Sachs’ public comments on bitcoin would never reflect this, as to do so would be out of line with the way most large financial institutions have manipulated investor sentiment. While the most blatant examples are events such as Jamie Dimon of JPMorgan Chase fudding bitcoin into a short-term decline while allowing parts of his firm to offer it to consumers, another notable example is the recent fudding of Elon Musk’s Tesla (TSLA). The investment bank has downgraded the stock three times in a row, yet it has continued to gain strength.
They just downgraded Tesla too. The opposite Goldman trade works almost every time.
— Ross Gerber (@GerberKawasaki) August 3, 2018
Do as I Say and Not as I Do
This is decidedly more sinister when one considers the fact that Goldman Sachs and its ilk rarely have unprofitable days over periods of up to a year, yet their public calls broadcast on stations like CNBC seem to miss the mark with alarming regularity.
Whether or not bitcoin is as doomed as Goldman suggests, or whether bitcoin maximalists are correct, remains to be seen. What is clear, however, is that large players such as Goldman (via Circle) and Microsoft (partnering with ICE) are moving into the space, providing the infrastructure and backing that might just enable cryptocurrency to continue to expand as an asset class.
Have your say. Are Goldman Sachs’ predictions of doom the opposite of what they actually think behind closed doors?
Images via Pixabay