Here Is Goldman's Annotated Chart Showing The History Of Bitcoin

Goldman has long had a love, hate relationship with bitcoin: while JPM's Jamie Dimon was slamming it and threatening anyone caught trading it with termination, Lloyd Blankfein was planning the rollout of a cryptotrading desk. While other brokerages were shunning futures trading, Goldman told clients "your money is welcome here." On the other hand, from a purely fundamental standpoint, Goldman was more ambivalent, unwilling or unable to embrace the currency, yet laying out under what conditions it may succeed as money, which nonetheless was a far cry from JPM's blanket determination that bitcoin is a pyramid scheme.

Then, this morning, the market awoke to a Goldman report that was released on Monday evening, in which as we reported earlier, Steve Strongin - Head of Goldman's Global Investment Research - said 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.

Asked if the market is accurately pricing the likelihood that several—if not most—of the current cryptocurrencies will ultimately fail?, his answer was surprisingly pessimistic:

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.

To be sure, Goldman did highilight some of the notable highlights of bitcoin, chief among which is the unprecedented value storage density, which is why Goldman's commodity chief proposes calling them not cryptocurrencies but rather cryptocommodities.

Despite being called cryptocurrencies, bitcoin and other digital assets are better described as “cryptocommodites.” A financial security—currencies included—has a claim or liability attached to it, as it is “secured” to an underlying real asset. Just as equity is secured to the future earnings of a real company, a dollar bill is secured to the US government and its tax revenue. In contrast, commodities have no obligation or liability to any government, company, or other entity. Given that bitcoin has no liability to any entity, it is a good like any other commodity. Bitcoin just happens to be the first digital commodity—in contrast to financial assets and money, which have long been digitized.

In most economies, a standard digital bank account provides ease of storage, secure transactions, and a positive carry. However, it is still a claim on a bank, and the funds cannot be concealed and transported without alerting regional authorities. To the extent that this is a problem, bitcoin solves it better than any other commodity (although other cryptocurrencies are starting to offer superior privacy and anonymity). This suggests that black markets and less developed regions without a reliable banking system would be the obvious sources of demand for cryptocurrencies.

But the most remarkable feature of cryptos: how much value they can concentrate in virtually no physical space.

Unlike other storage commodities like oil, gold, platinum, diamonds, and even cash, there is no need to hold much physical material to own bitcoin; even a technology as obsolete as the 3½ inch floppy disk can hold almost 30,000 private keys. There is no theoretical upper limit to the value of bitcoins in a wallet, but if we assume each wallet secured by this disk contains as much as the largest wallet today (180,000 BTC), this single disk could “hold” all bitcoins in existence and remain less than 0.5% full. Assuming a bitcoin market cap of roughly $190bn (as of late January), this disk would be the equivalent to either: 95% of the 4,583 tons of gold in Fort Knox, or 1,344 Very Large Crude Carrier supertankers of oil.

Goldman's conclusion:

On net, cryptocurrencies have superior physical attributes relative to other commodities for concealing and transporting large amounts of wealth, which could be valuable in dark markets and some areas that lack reliable banking systems. But a long list of hurdles remains for cryptocurrencies to reach the equivalence of precious metals in financial markets, and these will be difficult to overcome anytime soon. In the meantime, we believe gold still offers the best store of wealth given how institutionalized it has become over 3,000 years of active trading versus five years for bitcoin.

So bitcoin... or gold? To Goldman that is the question. Meanwhile, for your viewing pleasure, here is Goldman's chart showing the annotated history of bitcoin's Rise... and recent fall. The question is what happens next.

Comments

Noktirnal The Juggernaut Thu, 02/08/2018 - 23:51 Permalink

Well, for those 'cryptos' that are decentralized peer-to-peer networks, I hope you have enough EMP's to take out all the nodes.

Networks like Bitcoin and Ethereum are decentralized peer-to-peer networks on the internet, much like BitTorrent. You'd have to take out every node to destroy the network. Only one copy of the blockchain would need to survive. We'd have more pressing worries than finances if that were to occur.

In reply to by The Juggernaut

HRClinton dasein211 Fri, 02/09/2018 - 02:19 Permalink

Fine, let's call them Crypto Assets (CA).

Trading assets without intermediate "financial instruments" is then a purely PRIVATE matter for Citizens -- not a public matter of the State, or its true masters: the private cartel of bankers.

Unless private citizens have become chattel and property of this cartel or its enforcers (the State), no financial claim or compensation (fees, dues, permits, rent, licenses or taxes) can legitimately be made of the Citizens and their "stuff".

It is therefore the moral and Fundamental Human Right of everyone to resist, defy and fight these powers of Usury and Financial Slavery.

Insofar I have a domestic account for CA trading for fun, education and small speculations/wagers, I am willing and prudent to pay taxes on fiat gains or claim losses on my tax forms.

But... when it comes to my pile of aged and HODLed CAs, well... good luck in getting a single penny out of me. 

As for the sheeple, Bubbas and Moldtimers... good luck to y'all. You're gonna need it, living on the (((Bankster))) Plantation.

In reply to by dasein211

LetThemEatRand Thu, 02/08/2018 - 22:12 Permalink

Like the automobile that eventually made horses the exclusive means of transportation only for the Amish and maybe George W Bush during a photo op, blockchain is probably here to stay.  But for those who are curious, type "defunct auto manufacturers" into your search engine of choice to see the odds of any given blockchain based crypto surviving. 

LetThemEatRand Nature_Boy_Wooooo Thu, 02/08/2018 - 23:09 Permalink

I'm not trying to argue with you about Bitcoin specifically, but Google Chrome is based on open sourced Chromium.  Android is based on Linux.  It is pretty common for companies to take over someone else's idea, make it better, and dominate the space.  Given that Bitcoin is open source (like Chromium and Linux) and there's no one who can sue for copyright or patent infringement on the concept, this seems like a no-brainer to me.  Owning even 2 million bitcoins does not give the owner any right to the underlying technology.  It's like having 2 million separate downloads of Chromium on 2 million different computers running Linux OS, isn't it?  You still don't "own" the code or the concept.   I am genuinely curious about your reasoning for why this won't happen to Bitcoin.  

In reply to by Nature_Boy_Wooooo

Nature_Boy_Wooooo LetThemEatRand Thu, 02/08/2018 - 23:26 Permalink

No doubt that I agree with you but I never remember seeing a Linux ATM machine at my local fueling station. And despite Androids popularity I don't think we are going to see Linux disappear like Myspace.

 

Bitcoin may not remain the top coin but because of its decentralized nature it will always have a place with those who are looking for a safe open source platform just like Linux.

In reply to by LetThemEatRand

LetThemEatRand Nature_Boy_Wooooo Thu, 02/08/2018 - 23:32 Permalink

I love Linux.  I would use it exclusively except for the fact that it doesn't work with a lot of DRM protected content and being in the business world, I need to use MS Office and sometimes Corel products (Corel no longer supports Linux as far as I know).  The net result is that I end up using my Windows OS far more often even though I prefer Linux for lots of reasons including that I've never spent a dime for any Linux related product or OS.  My dual boot computers all have Windows as the default.

I get your point that Bitcoin may become the Linux of cryptos with the same hard-core following, but that doesn't bode well (in my mind) for token prices, given that Linux is free and yet only a tiny percentage of people use it.

In reply to by Nature_Boy_Wooooo

Nature_Boy_Wooooo LetThemEatRand Thu, 02/08/2018 - 23:56 Permalink

Although for the sake of humanity I am hopeful that you are wrong.

At the same time my confidence in human beings to be anything other than dipshit lemmings who will let Google be their crypto currency....... along with privileges to access their photos, web traffic, fitness activity, and everything else in their lives......... leaves me no option but to be prepared for that possiblity.

 

I still doubt that Bitcoins value ever goes to zero.

In reply to by LetThemEatRand

LetThemEatRand Childe of Hale Thu, 02/08/2018 - 23:58 Permalink

Notice that in your post Daimler and Benz had a "patent."  One of the first things they did was to get legal rights to the technology they developed.  Bitcoin is open source.  People (a term I use loosely because they are mostly bankers) are already copying the idea and gaining intellectual property rights to it and otherwise usurping it.    

 

In reply to by Childe of Hale

pcrs Thu, 02/08/2018 - 23:51 Permalink

Amazing how little knowledge it requires to write a research paper. A 24 word seed of a deterministic wallet can generate all the keys you wish for. Even for multiple crypto currencies. 

Golden Showers Fri, 02/09/2018 - 00:29 Permalink

What does McAffe have in common with PGP? SDS E-Business Server, eat my own dick license Symantec reach around INTEL 2010 -2013.

April 29. Oh, and Zimmerman munitions export without a license PGP?

So what the fuck is blockchain? What is a munition? What the fuck is encryption? What does this all have in common? What is different?

Not McAffe's stinky dinky. 300 million dollars Symantec. Intel. I know they are not the same, but the attitude has changed. Oh, in the 90's you couldn't encrypt shit and fly. But now BeastCoin is international. And this article talks about floppy disks. What the fuck?

When was the last time you saw a 3.5 inch floppy disk that wasn't attached to McAffe? If you said Office Space the other week on VHS, YOU'RE RIGHT!

I saw that shit too. And that was 1999.

If I wasn't such a paranoid fucking Phillip K. Dick head I'd say why not use encrypted money transfers to embed munitions, state secrets, and do it all on some asshole's laptop while his sucks his own dick pretending for riches? I mean it's not SETI, but how the fuck would you know?

But don't put it in your pocket. Then it just becomes an ordinary coin, Friendo.