As if the crash in cryptocurrencies that has erased nearly $550 billion of market value over the past month wasn’t bad enough, now Goldman Sachs has released a note stating that bitcoin and other cryptos are likely to see their values fall to zero.
According to Steve Strongin, head of global investment research at Goldman, most digital currencies are unlikely to survive in their current form and investors should prepare for coins to lose all their value as they are replaced with a small group of future competitors.
While Strongin didn’t provide a timeline for when he expects cryptos to hit rock bottom, he did say that recent price swings indicate a bubble and that the tendency for different tokens to move in tandem wasn’t rational for a “few-winners-take-most” market.
“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,” Strongin wrote. “Because of the lack of intrinsic value, the currencies that don’t survive will most likely trade to zero.”
Strongin said the current period of cryptocurrencies is an experiment and compared it to the internet bubble of the late 1990s. He noted that very few of the companies that existed then went on to become more valuable. Both Google and Amazon did, however in a “completely different form,” he added.
“So, are any of today’s cryptocurrencies going to be an Amazon or a Google, or will they end up like many of the now-defunct search engines? Just because we are in a speculative bubble does not mean current prices can’t increase for a handful of survivors,” Strongin said. “At the same time, it probably does mean that most, if not all, will never see their recent peaks again.”
Perhaps the future cryptocurrency winner hasn’t even been created yet, and as Strongin noted, if the current generation dies out, new cryptos may still pop up in their place – though probably in a different form altogether.
“Ultimately, I thin new cryptocurrencies will emerge but of course time will tell,” he said.