Like companies caught up in the 1990s dot-com bubble, the head of Goldman Sachs’ Global Investment Research unit believes most cryptocurrencies will likely fail and end up having no value. In an note, Steve Strongin said that most of today’s cryptocurrencies are “unlikely” to make it over the long term, CNBC reported.
“People seem to be trading cryptocurrencies as though they’re all going to survive, or at least maintain their value,” Strongin said in a note published on Monday (Feb. 5). “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.”
But in the dot-com bubble, Strongin said a few companies survived the storm and became more valuable — like Google and Amazon — but they emerged in a “completely different form.” That may turn out to be the case with cryptocurrencies, he said.
“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. But he cautioned that cryptocurrencies may never rise again to their historic highs.
Strongin’s note comes as bitcoin’s value dropped to roughly $7,600 on Monday (Feb. 5), a level that would represent a new low not seen in more than two months. That slide occurred as global concerns come to bear on the digital currency, tied primarily to bans on buying bitcoin levied by banks. But bitcoin’s value has increased slightly since then — to $8,320.74 as of 12:51 P.M. on Wednesday (Feb. 7), according to CoinDesk.
As reported by Reuters, the price, quoted from Bitstamp, now represents a fall that has taken bitcoin well off its peak of nearly $20,000 seen late last year. And, as noted in this space, last week was one to forget for digital currencies at large, where several names were off double-digit percentages. And, when it comes to bitcoin, the cryptocurrency could slide further: Citi analysts believe the cryptocurrency could fall below $6,000 to a range between $5,605 and $5,673.