The financial world is split on the potential of cryptocurrencies. J.P. Morgan boss Jamie Dimon thinks them only fit for criminals and residents of failed states while billionaire hedge fund manager Michael Novogratz is predicting a $40,000 Bitcoin in 2018. Goldman Sachs are somewhere in the middle, adopting a wait and see policy.
In an interview with Bloomberg Goldman Sachs CEO Lloyd Blankfein said that it was too early for Goldman Sachs to have a Bitcoin strategy, citing liquidity and volatility concerns. Referring to the recent extraordinary movements in bitcoin prices, he argued that,
something that moves up and down 20 percent in a day doesn’t feel like a currency, doesn’t feel like a store of value.”
If these issues were resolved and the currency behaved more like a regular asset then Blankfein promised Goldman Sachs would “get to it”. However, he was doubtful that would happen and while admitting that he had been wrong about things in the past, says that he is “not guessing that Bitcoin will work out.”
Liquidity and Volatility
Compared to fiat currencies like the dollar and euro, Bitcoin is certainly volatile. However, it is a lot less volatile than it used to be. Supporters hope that as it grows in popularity and becomes more deeply integrated into the global economy the volatility will continue to flatten out.
Part of this integration may be achieved through the upcoming bitcoin futures markets. Analysis by Bank of America Merrill Lynch has suggested that provided there was enough speculator interest then liquidity could be provided to the markets and volatility dampened.
Bitcoin has come a long way in a short time, but for a giant financial players like Goldman Sachs it still has a way to go.
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