According to Steve Strongin, Goldman Sachs Group Inc.’s global head of investment research, the tumble in cryptocurrencies that erased nearly $500 billion of market value over the past month could get a lot worse.
He said that he believes most cryptocurrencies shall fall to zero as current iterations are “too primitive” to be viable in the long term. Transactions, he says, are too expensive and lengthy, and cybersecurity issues plague the current cryptocurrency infrastructure.
“Whether any of today’s cryptocurrencies will survive over the long run seems unlikely to me, although parts of them may evolve and survive,” Strongin said. “Because of the lack of intrinsic value, the currencies that don’t survive will most likely trade to zero.”
He added that he thinks that the people seem to be trading cryptocurrencies as though they’re all going to survive, or at least maintain their value. “The high correlation between the different cryptocurrencies worries me. Contrary to what one would expect in a rational market, new currencies don’t seem to reduce the value of old currencies; they all seem to move as a single asset class.”
He also said that there is an important distinction between cryptocurrencies and fiat currencies. “If a government decides to phase out a currency, it will typically determine a residual value for that currency and exchange that currency for a replacement one,” he said.
Trading volume in Bitcoin spot markets reached $US6.5 billion in Q4 2017 that presents a garowth of 7 times on the average of the previous nine months.
Just last month, in a research letter to investors, the banking firm’s analysts warned about the increase in cryptocurrency values, highlighting the price moves in bitcoin and ether, as well as the stock price increases for companies which pivot to blockchain.
“We think the concept of a digital currency that leverages blockchain technology is viable given the benefits it could provide: ease of execution globally, lower transaction costs, reduction of corruption since all transactions could be traced, safety of ownership, and so on. But bitcoin does not provide any of these key advantages,” they said then.