The value of money comes from its utility as a facilitator of transactions and as an asset in diversifying portfolios – the dollar’s role is relatively good, hence its high demand worldwide, Goldman Sachs points out in a research study of 10 January .
However, continues the analysis note of the US investment bank, the same can not be said of many other types of money. “In some regions of the world, and at certain times throughout history, multiple currencies have circulated in the same economic area – a phenomenon now known as ‘dollarization.’ In addition, governments often restrict the use of domestic and foreign currencies within their own In these circumstances, it is natural to try to understand how alternative forms of money – such as digital coins – can be useful, “points out this research.
Goldman Sachs, who in this analysis focuses specifically on bitcoin as “money”, explains that there is much evidence that the search for cryptomoedas has originated in regions where exchange rate instability and / or capital controls exist. However, there is other evidence that the origin of this demand is mainly in retail speculation.
In practice, analysts at the bank believe, “bitcoin and other digital currencies face significant practical obstacles to wider adoption – including potential government regulation and excessive volatility.
And volatility was in fact a slogan for bitcoin in 2017. An analysis by Bloomberg of the global financial markets showed that only 7 out of 250 assets of all classes – including equities, sovereign bonds, currency and commodities – showed high volatility due to the rise and fall of their prices over the past year.
The digital currency bitcoin was considered, in a Bloomberg analysis, as one of the seven most volatile assets of 2017.
Last October 10, bitcoin surpassed the $ 5,000 mark per unit [after starting the year at $ 1,000], provoking great euphoria among the fans of this criptomoeda. Since then, it has been steadily rising, reaching a record high of $ 19,511 on 18 December. Soon after, in only a few sessions sank 44%. He retreated, plunged again, and returned to positive terrain in the last session of the year. Falling apart, the appreciation in 2017 was around 1,400%.
A bear earning 1,400%?
Such volatility led to Bloomberg highlighting a relevant aspect, on December 21, when bitcoin accrued an annual gain of 1,400%: the currency would be in a bear market when the balance of the year had a strong increase ?
When we have a bear market, it means that a certain security, index or other asset registers a decrease of at least 20% from the previous maximum. And why the figure of the bear? Because it attacks from top to bottom, with its claws, causing a downward movement.
Now, bitcoin, in the second half of 2017, has been in bear market three times. So in mid-December, when it sank more than 40%, the fact is that, in the accumulated of the year … was firing.
Bitcoin success? Depends on the country and the segment of the financial system
Returning to the analysis of Goldman Sachs, the question is whether bitcoin can be successful as “a form of money.” It depends … says the American bank.
“Theoretically, yes, if it proves to be able to facilitate transactions at a low cost and / or offer investment portfolios better risk-adjusted returns.” But in practice, the benchmark is high. The currencies of more developed market economies already provide and if blockchain technologies enter the mainstream, as it seems likely, the bar will get even higher. ”
“Blockchain”, in the literal translation, is a ‘block chain’ which is updated whenever a new transaction is made – and all systems connected to the network have access to that network in order to validate an item and prevent it from being sold two or more times.
That said, “bitcoin (and crypto derivatives in a more general way) could offer viable alternatives in countries and corners of the financial system where traditional money services are not being adequately provided,” conclude analysts Zach Pandl and Charles P. Himmelberg of Goldman Sachs.
Believe to invest
This analysis was released on the same day that Berkshire Hathaway’s well-known investor Warren Buffett said he was convinced that ” crypto-coins will not end well, ” so it’s not an investment you’re interested in – well this active [and the so-called Oracle of Omaha only invests in what he knows well].
But opinions differ a lot. Jamie Dimon, CEO of JPMorgan, said he was sorry he said he considered bitcoin “a fraud” despite reiterating he was not interested in this crypto.
With more or less fears, it is certain that there are those who throw their heads in this adventure. On Tuesday, January 9, Eastman Kodak announced the launch of a crypto-currency for photographers, KodakCoin, and the company’s stock shot immediately, climbing 128%.
Many companies are, in fact, navigating the wave of digital currencies . At the end of last year, according to a Reuters compilation, a lot of companies saw their stock climb on the stock market much as they had words like “crypto” or “blockchain” in their names.