Bitcoin Might Become Money without Threat to USD, Goldman Report Says

Goldman Sachs has produced a report titled “Bitcoin as Money,” where the Wall Street giant discusses the potential of cryptocurrencies as money and agrees that Bitcoin could, at least theoretically, be used as such.

A Goldman Sachs report sent to investors on Wednesday says that Bitcoin might be gaining more recognition for its functionality as money. Called “Bitcoin as Money,” the paper predicts that Bitcoin will climb higher this year, improving on its record performance in 2017. The leading banks will start looking seriously at it, and more companies will accept Bitcoin as a payment method, the nine-page report projects, but adds that Bitcoin will not replace strong currencies like the US dollar. 

The analysts note that once the blockchain technology becomes fully mainstream, Bitcoin “may offer viable alternatives in countries and corners of the financial system where the traditional services of money are inadequately supplied.”

According to lead report author Zach Pandl, cryptocurrencies might achieve more recognition as money primarily in countries where dissatisfaction with central banking systems is on the rise. He points out that Google Trends has identified “Bitcoin” as one of the most popular search terms in Nigeria, Ghana, and South Africa, which are countries with unstable national currencies. 

The report states further that for now, Bitcoin could be money at least in theory and might attain such status if “it proves capable of facilitating transactions at a low cost and/or providing better risk-adjusted returns for portfolios.”

Volatility remains one of the main obstacles, Pandl specifies. 

“Volatility would likely need to come down dramatically (either naturally or through the widespread adoption of cryptocurrencies designed to better stabilize purchasing power via supply adjustments) before we see broader adoption,” he adds. 

Interestingly, the Goldman strategist expects cryptocurrencies to deliver low returns in the long term, saying “our working assumption is that long-run cryptocurrency returns should be equal to -- or slightly below -- growth in global real output. Digital currencies should be thought of as low/zero return or hedge-like assets, akin to gold.”

Goldman’s report comes at a time when many reputable economists, politicians, regulators, and investors refuse to consider Bitcoin a form of money. 

Earlier, former businessman and politician David Stockman noted that Bitcoin did not represent money or even a real asset class. 

“It's basically a class of really stupid speculators who have convinced themselves that trees grow to the sky,” he said.