Keeping Up With The Cryptocurrencies - Goldman Answers Institutional Investors' Questions, Targets Bitcoin $3915

Having 'nailed' the price action recently in Bitcoin (calling the recent pull back, extension beyiond $3,000, with a target of $3915), Goldman notes that it's getting harder for institutional investors to ignore the rise of cryptocurrencies.

Last month Goldman's chief technician, Sheba Jafari, issued their forecast of where bitcoin is headed next. Recall, that as we first reported three weeks ago, Jafari said that "due to popular demand, it’s worth taking a quick look at Bitcoin here" and warned that "the market has come close (enough?) to reaching its extended (2.618) target for a 3rd of V-waves from the inception low at 3,134." She concluded that she was "wary of a near-term top ahead of 3,134" and urged clients to "consider re-establishing bullish exposure between 2,330 and no lower than 1,915."

She was right: on the very day the note came out, both bitcoin and ethereum hit their all time highs and shortly after suffered their biggest drop in over two years.

So what does Jafari thinks will happen next? According to the Goldman technician, Bitcoin is now "in wave IV of a sequence that started at the late-’10/early-’11 lows. Wave III came close enough to reaching its 2.618 extended target at 3,135. Wave IV has already retraced between 23.6% and 38.2% of the move since Jan. ‘15 to 2,330/ 1,915."

What does this mean for the uninitiated? In short, while bitcoin remains in Wave IV, it could go up... or down. She explains:

It’s worth keeping in mind that fourth waves tend to be messy/complex. This means that it could remain sideways/overlapping for a little while longer. At this point, it’s important to look for either an ABC pattern or a more triangular ABCDE. The former would target somewhere close to 1,856; providing a much cleaner setup from which to consider getting back into the uptrend. The latter would hold within a 2,076/3,000 range for an extended period of time.

However, at that point the next major breakout higher would take place, one which would take bitcoin as high as $3,915.

Either way, eventually expecting one more leg higher; a 5th wave. From current levels, [Bitcoin] has a minimum target that goes out to 3,212 (if equal to the length of wave I). There’s potential to extend as far as 3,915 (if 1.618 times the length of wave I). It just might take time to get there.

Goldman's analyst concludes with the following summary: "[Bitcoin] could consolidate sideways for a while longer. Shouldn’t go much further than 1,857. Eventually targeting at least 3,212."


And now, Goldman offers an FAQ for the institutional investor...

The debate has shifted from the legitimacy of the ‘fiat of the internet’ to how fast new entrants are raising funds. The hype cycle is in full effect with Bitcoin, the first, largest and most widely recognized cryptocurrency up almost 200% YTD (v 11% for the S&P 500) and a host of other emerging ‘altcoins’ growing in scope and presence (witness the growth of Ethereum).

Whether or not you believe in the merit of investing in cryptocurrencies (you know who you are) real dollars are at work here and warrant watching especially in light of the growing world of initial coin offerings (ICOs) and fundraising that now exceeds Internet Angel and Seed investing.


1. Two Sides To The Coin: Is Cryptocurrency a “Currency” or “Commodity”?

Answer: It depends who you ask. The complexity exists because coins have attributes of a currency (e.g. presented and trusted by some medium of exchange) and commodity (e.g. limited resource). The classification of cryptocurrencies varies by country, government and even application. In the U.S., the IRS has ruled that virtual currency does not have legal tender status in any jurisdiction. For tax purposes, the IRS treats virtual currency as property. 

2. How Big Is The Cryptocurrency Market?

Answer: Nearly $120 billion. Bitcoin remains the largest and accounts for nearly 50% of the total market cap (Exhibit 5).

There are currently over 800 cryptocurrencies out there, though just 9 have a market cap in excess of $1 billion.

While its growth has been impressive, the aggregate market cap of cryptocurrencies equates to less than 2% of the value of all the mined gold in the world.

3. What Is Ethereum? 

Answer: A Platform 1st, a Cryptocurrency 2nd. Ethereum differs primarily from Bitcoin in the latter is set up to be an alternative to ‘real money’ while the former is more of a platform set up to run any decentralized application and automatically execute “smart contracts” when certain conditions are met. Ethereum offers a digital currency like Bitcoin – called Ether – but this is just one component of its smart contract execution and primarily used to facilitate and reward using the network. However, the rise of Ethereum has not come without setbacks, including the ~$60 million hack of "The DAO", a venture capitallike organization with the mission of “investing” in Ethereum-related start-ups and projects (and is no longer operational today).

4. How Does One Trade Cryptocurrencies in the United States?

Answer: Digital Exchanges, Block Trades and (soon to be) Options. Individual investors can trade virtual coins on various online exchanges. Institutional traders have largely stayed out of the cryptocurrency market due to its relatively small size, structure of mandates and volatility, but block trading exists to facilitate the execution of larger orders. In addition, Bitcoin options exist and are traded on offshore exchanges. Futures and options may also be coming to the US soon. On August 2, 2017, the CBOE entered an agreement with Gemini Trust Co to allow cash-settled Bitcoin futures on CBOE Futures Exchange in 4Q-17 or early 2018.

5. What is an Initial Coin Offering (ICO)?

Answer: Fundraiser through token sales. The amount of money funding ICOs has grown exponentially and the speed at which money is raised via a white paper and internet browser has sounded the alarm bells from parties including the SEC and the People’s Bank of China. According to Coin Schedule, ICOs have raised $1.25 billion this year, outpacing global Angel & Seed stage Internet VC funding in recent months.

The Tezos blockchain raised a record breaking $232 million worth of Bitcoin and Ether through an ICO completed last month. The next closest? Bancor’s ICO which raised $150 million in mid-June. And the speed of ICOs is an added benefit: Gnosis raised more than $12 million in under 15 minutes.


tmosley Justin Case Tue, 08/08/2017 - 23:27 Permalink

TBH, I'm kind of impressed that the oldbug trolls knew to target a thread with the word "cryptocurrency" given that they had no idea that they should target one with the word "ICO" in it.I mean, literally no idea. It was like posting in a frontrunning thread.

In reply to by Justin Case

Mementoil tmosley Wed, 08/09/2017 - 01:23 Permalink

Given the current price action, I most certainly think that Bitcoin can reach 4000$, 5000$ or even 10,000$ by next Wednesday.Any price is possible, because it's an epic bubble which has gone parabolic.But I still won't touch it with a 12 foot pole, because I don't know the exact moment in which it pops.

In reply to by tmosley

wattie Tue, 08/08/2017 - 22:45 Permalink

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alphasammae Tue, 08/08/2017 - 22:45 Permalink

One more win for Goldman Sachs the official voice of the US Treasury. Of course, BITCOIN will continue going up to support the war and feed North Korea. BITCOIN is the bread and butter to North Korea, the new digital currency for money laundering that will support terrorism and undocumented deals through bartering and avoid sanctions.The deep state is doing nothing about BITCOIN, they are now pumping BITCOIN through GS and the FED behind as the FED feeds GS.

Iskiab NoWayJose Tue, 08/08/2017 - 23:25 Permalink

So true, I remember that Louis Reykeyser show. Guaranteed every buy recommendation was someone looking to get out of a bad position.

However, one recommendation isn't mainstream media. As soon as you start seeing articles about it it'll be time to dump it. Right now what's driving the currency is the black market so that will act as a support.

In reply to by NoWayJose

The Cooler King (not verified) Iskiab Wed, 08/09/2017 - 01:32 Permalink

What's even more funny is to watch all these same people on ZH who were avid 'Squid' haters, now, they're sitting on the edge of their seat soaking in every 'Squid' call on BTC going higher. If, tomorrow, the Squid would announce that BTC would crash to zero, they'd become squid haters again. PT Barnum was right.

In reply to by Iskiab

Justin Case The Cooler King (not verified) Wed, 08/09/2017 - 14:42 Permalink

The games not over yet. What counts is when yoar out of the game and what you have to speak about. At that point you have to find a low risk investment as yoar nest egg to retire so you don't have to eat Dr.Ballards in an old folks home. That's when you'll have time to say "I shoulda, coulda, woulda, but I didn't. Like going to a casino and saying yoar up $100 grand in the middle of the night, but what counts is how much moar you leave with than what you started with when you leave. Money in the pocket, not in potential gains, real gains and real losses.Good luck to all investors, we all have diferent investment vehicles for different reasons, all that matters is that in the end you are the winner not a weiner.

In reply to by The Cooler King (not verified)

Justin Case Iskiab Wed, 08/09/2017 - 14:31 Permalink

Louis Richard Rukeyser, ya, the image was good, but like every other gypsy fotune teller can't tell you what will be tomorrow, never mind the next year. People accept what fits their believe and shun anyone that says the opposite. You have to think for yoarself, there are no crystal balls that can tell you the future. You play the odds by what you think and can afford. Most people are greedy and that is a human trait. They're up thousands, so they double down! It's usually better to be conservative and take some winnings off the table, but greed rules. No one ever lost money taking a profit. Being the last one out is the bag holder.

In reply to by Iskiab