Global investment bank Goldman Sachs is questioning whether bitcoin can be a long-term store of value and digital gold. The firmâ€™s analysts cited various issues with the cryptocurrency, such as environmental problems, â€œlack of real use,â€ and competition from other cryptocurrencies.
Goldman Sachs Sees Problems With Bitcoin as Long-Term Store of Value
Goldman Sachs published a note outlining some problems with bitcoin as digital gold on Wednesday. The firmâ€™s analysts, led by its top commodities strategist Jeffrey Currie, have voiced concerns about whether the cryptocurrency could become a long-term store of value.
The analysts explained: â€œWhile bitcoin benefits from greater liquidity, it suffers from lack of real use and weak environmental, social, governance ESG scoring, due to its high energy consumption.â€ They also cited competition from other cryptocurrencies as a factor stopping bitcoin from becoming digital gold, elaborating:
Goldman Sachs explained that â€œReal use is important because it smooths the volatility of the price, as real demand adjusts to absorb swings in investment demand. It also means that the asset is unlikely to go to zero.â€
The analysts asserted that bitcoinâ€™s lack of real uses and its environmental problems make it â€œvulnerable to losing store-of-value demand to another, better-designed cryptocurrency.â€ They further claim: â€œBitcoin gave ground to other cryptocurrencies such as ether and altcoins. This, in our view, underscores the fact that competition among cryptocurrencies for the status of dominant long-term store of value is still on and adds additional source of risk to holding bitcoin.â€
As for bitcoinâ€™s environmental impact, the analysts wrote that there are concerns about the cryptocurrencyâ€™s electricity consumption used in the mining process, citing research from Cambridge University showing that it uses more energy each year than Argentina. However, many argue that bitcoin mining increasingly uses renewable energy.
A growing number of people, however, believe that bitcoin is a great store of value that can be used as a hedge against inflation, including the pro-bitcoin U.S. Senator Cynthia Lummis. Some even say bitcoin will replace gold as the store of value of choice. However, the Goldman Sachs analysts say, â€œwe think it is too early for bitcoin to compete with gold for safe-haven demand and the two can coexist.â€
Meanwhile, Goldman Sachs has brought back its bitcoin trading desk and is planning to launch a â€œfull spectrumâ€ of crypto investment products. In March, the firm reported seeing huge institutional demand for BTC. CEO David Solomon said early this month that he expects a â€œbig evolutionâ€ coming to cryptocurrency regulation.
What do you think about Goldman Sachsâ€™ comments on bitcoin? Let us know in the comments section below.
Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.