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Get Ready For Most Cryptocurrencies to Hit Zero, Goldman Says (bloomberg.com)
An anonymous reader shares a report: The tumble in cryptocurrencies that erased nearly $500 billion of market value over the past month could get a lot worse, according to Goldman Sachs Group's global head of investment research. Most digital currencies are unlikely to survive in their current form, and investors should prepare for coins to lose all their value as they're replaced by a small set of future competitors, Goldman's Steve Strongin said in a report dated Feb. 5. While he didn't posit a timeframe for losses in existing coins, he said recent price swings indicated a bubble and that the tendency for different tokens to move in lockstep wasn't rational for a "few-winners-take-most" market. "The high correlation between the different cryptocurrencies worries me," Strongin said. "Because of the lack of intrinsic value, the currencies that don't survive will most likely trade to zero."
Once the miners stop buying, the prices should normalize
I don't respond to or upvote ACs
The technology is interesting and useful, but cryptocurrency value is just due to the Beanie Baby effect.
12:50 - press return.
Are manipulating both the virtual assets themselves, as well as the regulatory environment around them thanks to lobbying.
What most people haven't realized yet is all the big banks plus tech firms (such as IBM) have been building up patent warchests in blockchain related technology, meaning if they can kill the open source virtual currency markets (where direct monetization and forms of centralized market manipulation are more difficult without direct community involvement and scrutiny) then blockchain technology can be leveraged to ensure the barrier between the haves and the have nots while allowing datamining to provably ensure the financial limitations of the have nots, the gotta gets, and the haves according to the sorts of game theory going on in MMOs today. Anybody who has played free to play and done calculations on either getting rare loot drops, or mining lootbox unlocks (for those games that have it) without just buying keys/experience accelerators will have some idea of what the endgame plan is for real life wage grinding.
You should be VERY afraid of the future that is coming, because if you don't band together now to defeat it, economically, socially, and politically, you or your descendants won't be in a position to do it in the future, assuming they haven't automated away your life before then.
When you see people without a ton of money eagerly running up debt to start buying an asset because they think it's going to double in value in a few months, your bubble is about to pop.
he said recent price swings indicated a bubble
wasn't rational for a "few-winners-take-most" market
...trade to [close to] zero means that there is no monetary reason to mine or process BC, so it very well could go all the the way to zero, or so close that it means nothing. if nobody is willing to spend the CPU cycles (and real world money for electricity) to confirm your BC transfers, did it really happen?
something that never existed in the first place?
Notice that he said "most cryptocurrencies", not "all".
The situation is that it is important to come early in the game of cryptocurrencies. Also, Bitcoin doesn't look like the end game. As a result, a strategy is to invest in many emerging cryptocurrencies and hope that one of them will become the next Bitcoin. Most people probably expect that most of these will soon become worthless, but they hope they invested in the good one, or that they can sell before the crash.
Goldman is self-interested in eschewing a method of financial transactions where it does not have the ability to control or extract value out of. It got late to the party and is SOL as far as most cryptocurrencies go.
That said, most cryptocurrencies are substantially overvalued because the underlying value of any currency - crypto or otherwise - has to be backed up by some type of economy. The USD used to be on the gold standard, and only started inflating substantially after it was taken off even though a not-insubstantial portion of that value is in services and intellectual property rather than goods. The inflation of the value of the currency is a natural side-effect of a number of factors, but the ones that are most relevant in this discussion are disparate classes of valuable assets (physical and non-physical), the participants interacting with the currency, and speculation. Also remember that the value of cryptocurrencies is also being exchanges for other currencies, so there are also transaction costs and the actual value of those currencies relative to the cryptocurrency.
In any event, if we use those measures, the inherent value of any currency is the value of the actual goods and services tempered by these factors. That there has been speculation driving up the price is obvious. More importantly, we cannot state the value of all cryptocurrencies is zero strictly because of speculation, because cryptocurrency value is based on the fact that there are people are still willing to exchange goods, services and other valuables including paper currencies in exchange for cryptocurrency!
Goldman is wrong. Blockchain-based cryptocurrencies are here to stay. What isn't wrong is the analysis that states there is overinflated value in the cryptocurrency. We can, of course, also say that of the inflated value of today's normal paper currencies backed by central banks, including speculation with various instruments and the perception of their underlying value. It's the same reason I can purchase currency futures and forwards for common currencies versus requiring special instruments like letters of credit for currencies of little value or with little trade with the currency of question (e.g. try to find a forward for Turkish Lira versus Burundian Francs). The only real difference is how that transaction happens.
And since Goldman is cut out, you better believe that they and JP Morgan and all of the investment banks are doing anything they can to keep themselves relevant in this brave new world of cryptocurrency. Spread FUD, use existing political connections to regulate or shut down cryptocurrency use, whatever. It's just that this time it really may not work.
Yes and they are also blocking all exchanges around the world, and credit cards.
The point behind the currency was to be a way to transfer value without the regulations attached to fiat money. Somehow it turned into an investment strategy instead. People were buying them to take advantage of the price fluctuations. It kind of defeated the purpose behind them.
Why would anyone pay attention to Goldman Sachs, really, on anything?
First, such a prediction is utterly self-serving: they have zero clue what to do with the cryptocurrency market, and wish that no one else did either. I expect they've had lots of inquiries from investment clients, asking questions they couldn't answer.
Second, they were an integral part of the 2008 crisis. In fact, Goldman Sachs admitted to having defrauded investors, and paid more than $5 billion as a settlement
I think I'd trust the bum down the road more...
Enjoy life! This is not a dress rehearsal.
There are a lot of complaints one can lob at cryptocurrencies but I want to address just one that at the moment I see as ultimately fatal to all proof of work systems. Since this fatality hasn't actually materialized yet I have to wonder if I'm wrong about it being unavoidable in the end. But I don't yet see how I am wrong so here goes:
The ENTIRE magic and near Genius solution that bitcoin and others perform is the avoid the "double spend" problem when there is no central authority to manage a secret signing key. Solving the double spend with distributed signing is the magical part.
The DOuble spend problem is that in an a normal distributed ledger that anyone can write to a bad actor could spend a coin, see it entered in the ledger as beloging to the seller, then after getting the benefit of the sale from the seller, re-write a newledger in which that spend never happened. The bad actor can then re-spend the same coin.
Block chain by itslef doesn't solve this. it's just a ledger format. But when you add the proof of work part then you have an escalating difficulty barrier. The seller waits to see the transaction is confirmed. If they are paranoid, they could even wait for several more epochs of chain extension. At that point if the bad actor wanted to re-write history they would have to create a new block chain that was longer than the currently accepted one. And that would be hard because of the multiple epochs of proof of work.
this is exactly why the fear in bitcoin is that if one person accumulated enough mining power they could execute a double spend. But since this is addative: it takes 3x more mining power to unwind 3 layers of the block history (and N-1 x more mining power than the world, to unwind N layers), it's hard.
Or rather it's hard, but only if the world has a lot of miners. If miners lose interest two things happen. First it becomes easier for the bad actor to accumulate enough CPU power to overwhelm the rest of the world's miners. Additionally, since Bitcoin in particular scales the difficulty to the transaction rate it also requires less and less CPU power to do this. (as miners lose interest and so the POW difficulty goes down)
Thus Cryptocurrencies only protect all that capitalized outstanding wealth only as long as their's an active pool of miners. If that goes away then the protection of the blockchain is gone and the double spend re-emerges. at that point it gets crazy.
SO why might this not have happened yet. I think maybe it's because the cost of mining a coin is so high that the cost of mining 2,3, or 4 coins to unwind 1,2, or 3 layers might not have been worth the gained value of the doublespend. But that' now. As the coin becomes increasingly capitalized then a lot of wealth will be transacted in each epoch (and the lightning network is amplifying this now). Thus the temptation for a fouble spend will eventually exceed the cost.
At that point there is a total heat death of the currency as no one can trust it.
Once the miners stop buying as you put it, things will normalize to zero
Some drink at the fountain of knowledge. Others just gargle.
Yes, like paper money. His point was, certain securities have soft landings built in. The price of gold might tank if people lose confidence in it as an investment, but it won't go to zero, because other people want to buy gold to manufacture things with. Paper money and cryptocurrencies, in contrast, are subject to dropping to basically-zero (hyperinflation). "Intrinsic value" may have been an inexact way to describe that, but it's a reasonable shorthand.
The opinions stated herein do not necessarily represent those of anybody at all. Deal with it.
When you see people without a ton of money eagerly running up debt to start buying an asset because they think it's going to double in value in a few months, your bubble is about to pop.
It's definitely a bubble... but whether it's "about" to pop is another question. A bubble pops when the supply of gullible people buying into the bubble starts to saturate. And there are probably a lot of gullible people out there who still haven't invested in cryptocurrency.
Or, to misquote John Maynard Keynes about betting against an irrational market, "the market can remain irrational for far longer than you or I can remain solvent."
It's by intention. Back in the 80s you'd get corporate raiders who'd find a company that had net assets more than it's share value, buy a controlling share and asset strip it, leaving a non-functioning wreck behind.
Somebody rebut this or I'll need to dump my bitcoins fast!
Sorry, it's true.
There was a delicate point in Bitcoin history where anybody with a lot of computers could have taken every Bitcoin in existence, simply by having more computers (you need to own 51% of the computers in the block chain).
If large mines start dropping out and people can organize themselves into gangs (or somebody has a vary large Botnet) then we might go back there.
No sig today...
Joce640k
I'm the grand parent poster here and you raise an interesting suggestion that I have considered thoughtfully and think maybe is not true. While the Double Spending scenario is correct, the "taking other people's bitcoins" argument may not be correct. I am pretty sure there's only two things you can do under the double-spend attack. One is to recover your own coins and the other is to vandalize other people's transactions. But what you cannot do it re-direct anycoin you did not own at some point to yourself. you can't take other people's coins (if they did not originally come from you).
here's why. When you spend a coin two things have to be true. 1. the blcok chain shows the coin is assigned to your public crytpto key 2. you can sign the transfer with the transfer you want to intitate with your private key.
a double spender doesn't know your private key. so they cannot take your coin.
what they can do is erase that transaction (so you never spent it) or they could erase the transaction where that coin came into your wallet in the first place (so you lose it). But that erasure won't in general transfer the coin to the doublespender but just to some previous holder of the coin.
The double spender can "steal" but it can only do so by resetting it's wallet back to an earlier state. So it's possible the erased transactions might take coins you got from the double spender. but the double spender can't actually make that historical wallet size bigger.
Caveat: I suppose one strategy would be for the doublespender to briefly buy every coin in existence (borrow some money to do it then sell the coins to pay back the borrowed money). then they could continually reset the chain back to that time when they owned it all.
Some drink at the fountain of knowledge. Others just gargle.