28.10.2021

Bankers doubt Bitcoin’s prospects again, but it can no longer be considered a bubble

The number of Goldman Sachs executives who have doubts about the future of Bitcoin continues to grow. After criticism from the former CEO of the bank, this point of view was supported by the head of the company’s investment strategy group.

We are talking about Sharmin Mosavar-Rahmani, who, in a recent interview with Bloomberg, stated that Bitcoin is a poor vehicle for preserving capital.

What’s wrong with Bitcoin?

Recall that Bitcoin is often compared to gold, which is the most popular “safe asset” in the world at the moment. But Mosavar-Rahmani disagrees. Here is her line, in which she shares a different attitude towards the first cryptocurrency.

The fact that everyone is digging into an idea and debating it does not mean that Bitcoin is a store of value.

That is, despite the abundance of Bitcoin’s advantages – such as decentralization, independence from any governments and banks, as well as equality of network participants – the Goldman Sachs representative does not consider BTC a suitable option for investing funds. Allegedly, the “popularity alone” of the cryptocurrency does not mean that it will cope with the tasks assigned to it.

The main complaint from the bank’s representative is the too high volatility of the cryptocurrency, that is, sharp changes in its value, which also do not allow Bitcoin to be considered an adequate medium of exchange. Mosavar-Rahmani even likened it to the recent rally in GameStop, aided by the WallStreetBets community of traders. Here is a quote.

Something with 80 percent long-term volatility cannot be considered a medium of exchange.

Bitcoin can really collapse by several tens of percent within a day – this happened in March 2020. However, this did not become the reason for the death of the blockchain project, in addition, the asset not only recovered in price, but also seriously exceeded its historical highs. Therefore, in this case, volatility played only in favor of investors.

Mosavar-Rahmani also opposes investing in gold. She said last year that large investors should avoid owning gold unless they have “a very strong view that the US dollar will depreciate.”

And although the executive does not see any merits in BTC, she considers blockchain to be a promising thing. Mosavar-Rahmani stressed that this technology is “not going anywhere” and has a bright future – especially if the level of acceptance continues to rise. She tried to highlight the differences between cryptocurrency and blockchain, saying that the latter could become a vital part of the global financial infrastructure.

Michael Wu, CEO of digital asset financial services company Amber Group, has a different opinion. He believes that such attempts to “devalue” Bitcoin have no fundamental prerequisites. Rather, on the contrary – the main cryptocurrency will never be considered a bubble.

Wu explained his point of view during an interview on CNBC. Here’s a quote from Cointelegraph.

I think this always happens when people witness the formation of a new paradigm. It all starts with doubt, with skepticism. This is quite natural, because many people need time to understand and accept a new concept.

That is, the expert believes that such statements and criticism are caused exclusively by the novelty of the industry. So, representatives of the older generation – and especially bank employees – are quite likely to have such an attitude.

Wu also found a way to explain the huge price spikes that can be seen on the Bitcoin chart.

In the early stages of development, this skepticism is always accompanied by strong price volatility. However, I don’t think Bitcoin can be called a bubble. As I mentioned earlier, we have all these institutions, all these billionaires, multi-billion dollar companies and newcomers who just got into the cryptocurrency market. They buy bitcoins, they buy cryptocurrency, and its maximum supply is limited to just 21 million coins.

That is, the expert does not exclude local corrections – that is, the rate drops – as the value of Bitcoin continues to grow in the eyes of the public. But these corrections cannot be considered a “bubble break” point or anything like that. This is just a normal payment for the development of technology and its gradual adoption in the world.

We believe that Michael Wu’s opinion truly reflects the current market situation. Bankers and other critics of Bitcoin forget that the first cryptocurrency has existed for just over twelve years, and Ethereum actually started working in the summer of 2015. That is, technologies are objectively at the initial stage of their functioning, which means that they can be characterized by the same sharp jumps in the rate.

There is little useful in criticizing cryptocurrencies. They can only delay the transition of humanity to a more perfect and suitable financial system. And the representatives of the banks are clearly not interested in this.

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