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A man passes in front of a Bitcoin exchange shop in Krakow, Poland.
Goldman Sachs is not optimistic for the near-term fate of cryptocurrency. In its mid-year economic report, the bank’s investment management group highlighted “cryptocurrency mania” as one of six factors creating an unsteady undertow affecting markets for the remainder of 2018.
“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,” Sharmin Mossavar-Rahmani, Goldman’s chief investment officer of the private wealth management group, said in the report published Friday.
The Wall Street giant reiterated its January call published in the full-year outlook that bitcoin’s meteoric rise to $20,000 “dwarfed” mania seen during the dot-com bubble. The cryptocurrency has lost roughly 60 percent of its value since that high in December, and was trading near $7,470 Friday, according to industry site CoinDesk.
“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.” Mossavar-Rahmani said.
Goldman is the latest global investment bank to take the view that cryptocurrency is neither a medium of exchange, “nor a unit of measurement, nor a store of value.” On Thursday, UBS made a similar assessment and said bitcoin is too “unstable” to be a mainstream currency.
Mossavar-Rahmani reminded investors of cryptocurrencies’ value compared to that of the total financial markets’.
“Such declines will not negatively impact the performance of financial assets because cryptocurrencies represent just 0.3 percent of world GDP as of mid-2018,” she said. “In fact, we believe that they garner far more traditional media and social media attention than is warranted.”
The investment bank is reportedly looking to launch a bitcoin trading desk this year and become the first Wall Street firm to make a market in cryptocurrencies. The bank’s CEO Lloyd Blankfein said in June that while he doesn’t own bitcoin, he wouldn’t rule out the cryptocurrency having a future.