Bitcoin Surges Back Above $8500 As Goldman Doubts Cryptocurrency Survival

Following reassuring words from US securities regulators yesterday, Bitcoin has extended its rebound back above $8500 (from below $6000), shrugging off Goldman Sachs' latest report questioning cryptocurrencies' long-term existence.

Bitcoin is up over $2500 from its anxious lows ahead of yesterday's US regulatory hearing...

As Mike Krieger noted last night, the Chairman of the U.S. Commodity Futures Trading Commission (CFTC), Christopher Giancarlo, said at today’s hearing with the Congressional Committee on Banking, Housing, and Urban Affairs.

In case you missed it, here’s his opening statement:

With your permission, I’d like to begin briefly with a slightly different perspective, and that is, as a dad. I’m the father of three college age children, a senior, a junior and a freshman. During their high school years, we tried to interest them in financial markets. My wife and I set up small brokerage accounts with a few hundred dollars that they could use to buy stocks, yet other than my youngest son who owned shares in a video game company, we haven’t been able to pique their interest in the stock market. I guess they’re not much different than most kids their age.

Well something changed in the last year. Suddenly they were all talking about Bitcoin. They were asking me what I thought, and should they buy it. One of their older cousins, who owns Bitcoin, was telling them about it, and they got all excited, and I imagine that maybe members of this committee may have had similar experiences in your own families of late.

It strikes me that we owe it to this new generation to respect their enthusiasm about virtual currencies with a thoughtful and balanced response, not a dismissive one, and yet we must crack down hard on those who try to abuse their enthusiasm with fraud and manipulation.

That’s just about as good as you’re gonna get from a government regulator.

And the entire crypto universe is notably higher on the relief...

And the extended gains appear to be shrugging off a widely distributed report from Goldman Sachs questioning the existential viability of cryptocurrencies.

Steve Strongin, Head of Global Investment Research, argues that that the current generation of cryptocurrencies is unlikely to survive even if blockchain technology endures.

Whether any of today’s cryptocurrencies will survive over the long run seems unlikely to me, although parts of them may evolve and survive.... To my eye, they still seem too primitive to be the long-term answer.

Is the market accurately pricing the likelihood that several—if not most—of the current cryptocurrencies will ultimately fail?

I don’t believe it is. 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. But if you believe this is a “few-winnerstake-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.

Is there a useful role for cryptocurrencies in financial markets today?

As it relates to the underlying technology, there is clearly a role for improving the ledgers that underlie financial transactions. Substantial investment is being made in leveraging blockchain technology to more efficiently and quickly settle contracts, confirmations, and related transactions. But the current technology does not yet offer the speed that will be required for market transactions.  Now, if the question is whether there is a fundamental need for a currency that is not tied to a central bank, the answer in my opinion is “no” in most cases, at least within the regulated markets. Even if transaction times improved, the notion that people would prefer cryptocurrencies for everyday transactions seems like a stretch. There is perhaps a slightly more compelling case for their use as a store of a value.

Cryptocurrencies are well-suited in particular for the many documented use cases in dark markets. They are cheap to store, easy to conceal and hard to trace. So it is plausible that cryptocurrencies may have a long-term role to play in these markets, but even that is not assured. And the possibility of cryptocurrencies catching on in the dark markets has little to no implication for their applications elsewhere; it is very difficult to turn an asset that was optimized for dark markets into one suitable for lit markets. Is it possible? Yes. But in my view, it is unlikely.

However, Goldman does attempt some 'fair and balanced' reporting by interviewing Dan Morehead, founder and CEO of Pantera Capital, an investment firm focused exclusively on cryptocurrencies and one of the largest institutional investors in crypto to date.

Not surprisingly, Morehead is a diehard crypto aficionado who believes that cryptocurrencies have enormous disruptive potential across financial services and money transmission.

My passionate belief is that most of the largest blockchains today will survive. That doesn’t mean that 90% of the altcoins and ICOs being issued right now won’t go to zero; I believe they will. But blockchains like bitcoin and Ethereum and Ripple will almost certainly still be very important in 10 or 20 years.

He sees cryptos as competitors to correspondent banks, credit card companies, conventional stores of wealth like gold, and fiat currencies. Assuming bitcoin captures some market share from each of these incumbents, he estimates its fair value could be roughly $500,000.

If I had to take a really big-picture view of the terminal value of bitcoin, I think it’s roughly a half a million dollars per bitcoin. How do I calculate that? By taking into account some of the markets that bitcoin will disrupt.

In Morehead’s view, it is therefore difficult to call recent cryptocurrency price action a bubble. And the potential for new market entrants in the form of institutional investors - which are essentially non-existent in the space today - gives him confidence that the price of cryptos will be substantially higher a year from now.

 I do not believe this is a bubble. Cryptocurrencies are clearly very volatile. And anything that can go up 10 times in six months can easily go down 50% in a week. So I have no idea where it’s going to be in the short run.

But it’s very difficult for me to believe that we are in the midst of a bubble given that almost all institutional investors have zero exposure to it. That said, I do expect a substantial wave of institutional investor flows into the space over the next 18 months.

What could quash his enthusiasm? Adverse regulatory action.

 I think the main risk is that regulatory bodies around the world issue rulings that are excessively harsh in their treatment of cryptocurrencies. This risk is particularly high for ICOs, which are very speculative—like early-stage venture capital—but are also a very important way to fund new projects. That said, overall, US regulatory bodies have been reasonable in allowing the cryptocurrency market to develop while coming down on bad actors like the Silk Road. And it has been a long time now since I’ve worried about the long-term future of blockchain. I think that has to do with the general population really embracing this new technology, learning how it works, and getting used to it. I have no doubt that blockchain will be important 20 years from now.

And judging by yesterday's hearings, that is less of a problem now (though definitely still a worry).

Comments

ThinkerNotEmoter Gaius Frakkin'… Wed, 02/07/2018 - 09:19 Permalink

The rare, valuable, maff is working again - guaranteed to infinity. As designed.  The maff wasn't broken before.  The rare maff was just on a temporary hiatus.

Buy, peoples, BUY!!!!!

If you don't buy it's because you're jealous, a loser, ready to die from old age, stoooooooOOOoopid, a flat-earther, anti-technology, a peanutz, and/or an old-bug.

Technical analysis complete.

In reply to by Gaius Frakkin'…

LSD - Lower Sl… pods Wed, 02/07/2018 - 10:31 Permalink

Yeah, what a moron.  It's not like the crypro pump-n-dumpers are name calling as the foundation of their "argument." It seems that that's what he is responding to anyway.

Oh, wait...

"It's a generational thing.  A lot of Boomers will die thinking global warming is real and races are equal."

LOL!  Now that's a technical analysis!  Seems to go to TNE's point.

In reply to by pods

TheReplacement LSD - Lower Sl… Wed, 02/07/2018 - 11:25 Permalink

Not really.  It would seem he has an aversion to researching the maff and understanding the technology and what it is capable of doing.  He would, seemingly, rather take the easy way, which is given him by the banksters, and continue to live in his gilded cage of usury and taxes until he is dead, dead, dead.

Gold is not going to break the banks.  The bankers have armies and drones and fleets of printing machines (just rare and valuable ones and zeroes really).  Gold will make fortunes for those who hold it when the banks are finally broken.  The problem is one of how to reach that point.

This is why everyone who values liberty should be hoping and praying that cryptos (perhaps not all but at least some) are true to their name and intent and capable of breaking the stranglehold the bankers have on the world.  ONLY WHEN THIS HAPPENS will gold be priced according to its real value.

 

In reply to by LSD - Lower Sl…

Coinista TheReplacement Wed, 02/07/2018 - 11:48 Permalink

"he has an aversion to researching the maff and understanding"

Umm... If you're going to be helping cryptos, please don't make the guy's point for him in your second sentence.  Calling him stupid ("aversion to ... understanding") isn't an argument.  Just the opposite, it clearly states that you have no argument.  Please read up some and use actual arguments for crypto instead of ad hominem attacks.

With help like this who needs enemies?

In reply to by TheReplacement

TheReplacement Coinista Wed, 02/07/2018 - 12:09 Permalink

You take words and twist them to mean the opposite of what they were intended to mean.

No doubt he, and you, has had plenty of opportunities to read posts and articles full of factual and detailed arguments for and against cryptos but obviously has not as is demonstrated by his repeated shitposts.  Either way, thank you so much for setting the example you call for in your post. 

Furthermore, if cryptos need my help then they are not worth helping.  I was trying to help a person or two maybe.  Even if I could help cryptos I would not save for the ones I believe solve the problems I think need to be solved.  If you know me then you know I don't think bitcoin is a very good solution but rather more of a proof of concept and that gold is the real deal when it comes to a store of wealth.

So for example, a lot of business is going to be conducted on networks like Ethereum.  People and businesses are going to need, in this example, Ether to conduct transactions regardless of the token they use.  The poster above is definitely not willing to take five minutes to research and understand this rather than bleat on about "maffs".  Stupid you defends him and attacks me.

 

In reply to by Coinista

pods tmosley Wed, 02/07/2018 - 09:45 Permalink

Reddit has some stuff. I go there for the links mostly.  Haven't been on reddit much but it looks like most discussion is: Point, counterpoint, accusation of being troll, pile on.  Not exactly great for debate, but there are some good links.

The Tether issue is near and dear to my heart, as my preferred exchange offers (I think) the only USD/USDT pair.  Which would make this pair THE exit of The Station Nightclub.  Not good.  At least they do offer a lot of USD pairs, so I am not stuck trying to squeeze out of that door.

pods

In reply to by tmosley

TheReplacement Silver Savior Wed, 02/07/2018 - 11:30 Permalink

Not sure I understand.  Tether is tethered to USD.  You'd only win if USD spikes but then, why not just hold USD if that is what you think will happen?

If you can find an exchange that has gold (real physical that you can take delivery of) then you have both an exit and a real solid volatility play.

I've posted the link too many times already.  Search engines work.

In reply to by Silver Savior

IH8OBAMA tmosley Wed, 02/07/2018 - 11:27 Permalink

tmosley: "... I hopped back in after this news."

"hopped" implies a small, child size stake, t.  If you had said "jumped back in" I would think of at least a bit larger stake worthy of a man and if you had used the term "plunged back in" then I would think you are mortgaging your house (if you have one) to leverage your investment to your normal crypto state.

So, as it is.  It looks like you "HOPPED" back in with your child size bet of maybe $20.  LOL

 

In reply to by tmosley

RedDwarf tmosley Wed, 02/07/2018 - 11:43 Permalink

It doesn't matter if tether is a fraud or not.  The USD itself is a fraud anyway.  People will find ways to move crypto into and out of fiat or a substitute if the banks aren't willing to provide.  Something like tether, legitimate or not, will always exist so long as fiat exists.  You're waiting for Godot by focusing on tether.

In reply to by tmosley

HRClinton Roger Ramjet Wed, 02/07/2018 - 11:08 Permalink

Speaking of Fools... anyone who listens to GS, JPM or ZH Moldtimers.

How about some REAL forking/f**king CC news - from Feb. 2nd, to prove to you the Level and Depth of systemic deception & manipulation by the (((Predator Class)))...

Feb. 2, 2018

https://www.crypto-news.net/crypto-experts-to-discuss-the-future-of-blockchain-in-israel-on-march-28-at-blockchain-bitcoin-conference-israel/

Copy/pasted text below:

 x x x x x x x x x

On March 28, Tel Aviv will host Blockchain & Bitcoin Conference Israel, a large conference dedicated to blockchain, cryptocurrencies and ICO. Speakers will discuss the future of the crypto industry, and blockchain companies will present their new developments. 

Why Israel?

Blockchain community said that Israel is the startup nation. The country started to develop blockchain in 2015, and a year later, according to the audit company Deloitte, there were about 500 fintech startups.

In addition, according to the Bloomberg 2017 Innovation Index report, the economy of Israel is among the Top 10 most innovative world economies. It is not surprising, since the country allocates 4.25% of annual GDP to research and development.

Such a development of fintech is facilitated by the Israeli authorities. The country has a state incubator supporting startups. And Investment Law allows foreign companies to reduce the rate of tax deductions to 10%, which makes the state attractive for foreign entrepreneurs. In addition, the Israeli Venture Capital Industry ranked 5th in the world for venture capital availability.

Israel is also one of the countries where cryptocurrencies have no defined legal status, but are still subject to taxation. Israel Tax Authorities issued a statement saying that any business connected with cryptocurrency should pay taxes on profits. Thus, cryptocurrencies in Israel are in fact included into the legal field. In addition, the authorities have intentions to protect the interests of investors and entrepreneurs by controlling the ICO. To do so, the national securities regulator ISA has created a special committee aiming at finding out whether the securities legislation is suitable for ICO regulation.

x x x x x x x x

You can forget about talking sense to Bankster agents and shills non ZH, and even the vocal, intellectually-deficient Bubbas and philosophically-wanking Moldtimers.  But I hope that the rest of you on ZH got it:  The (((Global-Lusts))) don't want to kill CC. They just want to create enough FUD and churn, so that their own can muscle in and take over. This a HOSTILE TAKEOVER attempt, pure and simple.

Got clarity? What ya gonna do about it? Bitch, moan, complain, blog a witty retort? Prep & hide? Or are you gonna Organize, Resist and Fight back?  What ya gonna do?

In reply to by Roger Ramjet

P.K.Snosage Wed, 02/07/2018 - 08:46 Permalink

"Following reassuring words from US securities regulators yesterday,"

Hmmm.... It remains to be seen how FinCEN is going to be able to deal with the issue of North Korea using its crypto stash to evade financial sanctions. This rather small matter is not going to go away, and will come back to bite hard.

pods NoDebt Wed, 02/07/2018 - 09:47 Permalink

No, no, please no MCMGA.  Things were just starting to come back down to earth.  Newegg has some stock (although too high) and people were beginning to dump stuff on eBay.  A couple more weeks to a month of pain would result in me being able to achieve all my goals on time and under budget.

Sorry, I'm selfish. Sue me.

pods

In reply to by NoDebt

pods Nature_Boy_Wooooo Wed, 02/07/2018 - 10:16 Permalink

Oh I am a Tether "FUD" pumper?  I'm sorry, I didn't notice that I dissolved Tether's relationship with their auditor.  I hold companies to the same standard I hold everyone. If it's true, show me the numbers.  When money is involved, you saying so is NOT enough.

The Tether issue is a HUGE possible risk for cryptos. Wouldn't you want to know if it is legit?

If it is legit, well that really opens up some doors, especially for trading some smaller coins. 

But if it isn't, then the whole market is ripe for a crash. Not a drop and correct, crash. Lost money, closed exchanges, and goodwill that will never be earned back.

If I am guilty of bringing that to light, well so be it. I stand guilty of all that accuse.

And stop the stupid FUD/FOMO shit. We are all adults here. 

pods

In reply to by Nature_Boy_Wooooo

Nature_Boy_Wooooo pods Wed, 02/07/2018 - 10:39 Permalink

You've been spreading FUD about Tether for a few months along with tmosley. We know tmosley and bitfinex'ed were spreading Tether FUD because they sold the bottom and were desperately trying to get back in and now we see in the last 24 that you are excited about the possibility of graphics card prices coming down and your ability to get in crypto after missing out.

 

Ironically nothing has changed with Tether but suddenly you and tmosley are excited to hop in.

In reply to by pods

pods Nature_Boy_Wooooo Wed, 02/07/2018 - 11:45 Permalink

A few months? I only caught word of Tether in the last month. So maybe I have brought it up for a couple of weeks.

But, don't let it get in the way of your pumping.

I don't TRADE cryptos. FYI. So no need for me to drop it to "get back in."

I mine.  So yes I have a vested interest in things not blowing up because some fucks got greedy and manufactured some unbacked coins that happen to effect all of us.

If Tether is on the up and up, great. No harm, no foul.  

But I want to know. Not be told things are okay.

pods

In reply to by Nature_Boy_Wooooo

Nature_Boy_Wooooo pods Wed, 02/07/2018 - 14:00 Permalink

If dwelling around to counter the lies of FUDsters like you tmosley, and No-Coiners is considered pumping.......than call me a pumper.

 

Mining profits are shit right now so your savings is offset. My 2 cards combined are making $6 a day when they were hitting $17 a day in December so you missed out in a ton of profit by holding out on buying.

In reply to by pods