The wild swings in the price of Bitcoin prove it’s not a real unit of value, though blockchain technology is here to stay, according to Sharmin Mossavar-Rahmani of Goldman Sachs Group, the American multinational investment bank and financial services company.
“Something with a long-term volatility of 80 percent can’t be considered a medium of exchange. Just because everybody piles into an idea and talks it up doesn’t mean it’s a store of value,” said Ms. Rahmani, head of the investment-strategy group for the bank’s consumer and investment-management division during a briefing.
Bitcoin surged to a record close of almost $41,000 in early January, but has since dropped back to about $34,000.
Ms. Rahmani’s skepticism about Bitcoin’s value is similar to that of European Central Bank governing council member Gabriel Makhlouf, who said last month Bitcoin investors should be prepared to “lose all their money.” Yet, the cryptocurrency still has plenty of high-profile investors as many consider it as “one hell of an invention” and an alternative, gold-like asset.
Ms. Rahmani drew a distinction between Bitcoin and blockchain technology. Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system. A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain.
That technology could facilitate the smoother flow of global assets and will become part of the financial infrastructure, she said.
Large number of supporters
Despite many financial experts remaining skeptical about it, the continuous buzz over Bitcoin is leading more banks to develop cryptocurrency products for clients. The popular investment bank and financial services company JPMorgan Chase launched its own digital currency last year while some others have started a Bitcoin-only fund. Even Goldman Sachs themselves may be joining the party.
Meanwhile, policymakers across the European Union (EU) and from various parts of the world have come forward with the demand for uniform laws to regulate the transactions and usage of cryptocurrencies given its high potential to be used in a negative way.