Most cryptocurrencies are doomed to fail, according to a note by Steve Strongin, head of Goldman Sachs global investment research.
Investors are trading cryptocurrencies under the assumption that they will all survive, Strongin said.
A lot of cryptocurrencies don’t have “intrinsic value”, Strongin said, adding that it is unlikely whether current cryptocurrencies that continue popping up will make it in the future.
“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. 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,” Strongin was quoted as saying by CNBC.
“But if you believe this is a ‘few-winners take-most’ situation, then the potential for retirement depreciation should be taken into account. And because of the lack of intrinsic value, the currencies that don’t survive will most likely trade to zero.”
His comments follow a huge sell off last week that wiped off over half a billion of the market cap of Bitcoin – the digital currency dipped to a level under $6,000 for the first time in three months.
“.. 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.”
