Goldman Sachs warning on cryptocurrencies: “will most likely trade to zero”

Since last year the cryptocurrency market are facing a sharp correction. In the World Economic Forum Annual Meeting celebrated in Davos on January 23-26 many leaders showed their worries about the cryptos.

In many places cryptocurrencies have been banned, like South Korea and India. Recently some banks banned purchases of cryptocurrencies with credit cards. On Monday Steve Strongin, head of Goldman Sachs global investment research, said that cryptocurrencies don't have "intrinsic value" and that it's "unlikely" whether any of today's digital currencies are likely to remain in the future.

He said "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-winners take-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".

In a paper published today two University of Pittsburgh researchers, Carey Caginalp and Gunduz Caginalp, tried to determine Bitcoin's value, and concluded that it's "an asset which has no value by traditional measures".

They said "The cryptocurrencies may simply be a mechanism for a transfer of wealth from the late-comers to the early entrants and nimble traders".

If we are trading cryptocurrencies we need to be careful. This situation with governments, banking institutions and scientists can continue for a long time pressuring the price.

We think that this year cryptos can going back to the highs seeing last year. But we'll continue to have high volatility and maybe strong falls in the path.

What is your outlook on cryptocurrencies?