Financial safety

Goldman Sachs: Today's Cryptocurrencies Will Go to Zero, But Stronger Digital Currencies May Still Emerge

Most, if not all cryptocurrencies on the market today will have further to fall, says Goldman Sachs. But on the bright side, the Amazons and Googles of digital assets could spring up in their wake.

That’s according to a Feb. 5 note featuring a Q&A with Goldman Sachs head of Global Investment Research Steve Strongin. Strongin says that he believes most cryptocurrencies will ultimately fall to zero as current iterations are “too primitive” to be viable in the long term. Transactions are costly and lengthy, and cybersecurity issues plague the current cryptocurrency infrastructure.

“Whether any of today’s cryptocurrencies will survive over the long run seems unlikely to me, although parts of them may evolve and survive,” Strongin said. “Because of the lack of intrinsic value, the currencies that don’t survive will most likely trade to zero.”

Strongin also pointed to the dotcom bubble of the late 90s as an example of what may be in store for investors. Many of the early winners then such as Pets.com and eToys.com have fallen—making way for today’s titans like Amazon and Google. A similar scenario could play out in the cryptocurrency space.

“In hindsight, this period will probably end up looking like the internet bubble of the late 1990s. Very few companies that existed then went on to become even more valuable. Amazon did—but in a completely different form. Google—a big winner today—had only just been formed at the time,” he said.