Goldman Sachs Rings an Old Bell on Cryptocurrency Risks

by: The Knowledge Group

August 07, 2018


Like so many things that suddenly become the trend du jour, crypto-currency is reaching the zenith of its bubble, according to Goldman Sachs. And that means traditionally anyone who gets on the train at this last station is almost assured to lose all their worth as the investment begins to crater drastically. Using very politically correct terms and statements that crypto-currency doesn’t match or perform to the standards of a typical, reliable world currency, the investment bank is emphasizing that bitcoin and others are simply inflated positions based on 100 percent speculation and no underlying, inherent value whatsoever. So, what else is new?

Goldman Sachs quickly points out the dramatic drop of bitcoin’s value from a level of $20,000 per coin to a much lower price point of $7,500 as the basis of its conclusion. However, this fails to really represent any substantial analysis in the currency. Just about any world currency today has no inherent value. The U.S. dollar, for example, was decoupled from the gold currency decades ago and instead linked to our national gross domestic product. So, fundamentally, bitcoin is not that much different from world currency on a value basis. The bid delineator is that world currencies are backed by their governments whereas bitcoin and other crypto-currencies are entirely existing on their own in a free market stasis. So, if they go bad, there’s no safety net. And that would surely scare any banker, especially when they see so much real currency flowing into crypto-currencies to stake a position.

Goldman Sachs will neither be the first or the last of banks warning the fates of the dire evils of crypto-currencies. Keep in mind as well the banks have a vested interest in supporting traditional currencies as that is where most of the government insurance programs exist as well (which also bail out banks in trouble). It is to their advantage to dampen unregulated means of barter. That said, crypto-currencies will continue to work and grow as long as they provide key benefits of commerce, generally accepted values across borders and industries, and are accepted as a means of payment. Ironically, these are the same qualities that make a government currency successful as well.

The Knowledge Group will be hosting a number of webcasts on all things blockchain and cryptocurrency.  Our next event will be on the patent race with new cryptocurrencies and blockchain tech, just like our other webcasts this is eligible for Continuing Legal Education (CLE) credit and will be available on-demand if you can’t make the live event on August 23rd.  You can find all the registration information by clicking here.  We look forward to seeing you there.