Goldman Sachs Group Inc. has released a research report blasting Bitcoin and other coins as unsuitable investments for its clients.
“We do not recommend Bitcoin on a strategic or tactical basis for clients’ investment portfolios even though its volatility might lend itself to momentum oriented traders,” said the Goldman report.
The report compared Bitcoin’s run to the Tulip mania of the 1600s in the Netherlands, one of the most infamous instances of speculative bubbles.
Cryptocurrencies, including Bitcoin, are not an asset class — they do not generate cash flow or earnings and do not provide consistent diversification benefits. Nor is there evidence they are an inflation hedge, the report said. While hedge funds might find digital tokens appealing due to their high volatility, that allure alone doesn’t form a viable investment rationale, according to Goldman.
Bitcoin investors often cite its limited supply, capped at 21 million, as a catalyst for an ultimate price surge. But, Goldman said, cryptocurrencies as a whole are not a scarce resource. For instance, some of the largest cryptocurrencies, including the Bitcoin-offshoot Bitcoin Cash, were formed following a programming fork. The bank also cited recent illicit activities tied to cryptocurrencies, including Ponzi schemes, ransomware attacks and money laundering.
Goldman in its report highlighted Bitcoin’s extreme volatility, singling out the March 12 session as an example, when the token dropped more than 25% amid a coronavirus-induced selloff.
Bitcoin gained as much as 4.1% to $9,225 in New York trading on Wednesday.
See summary of the report below: