Bitcoin, ethereum, ripple and other cryptocurrencies have taken the finance world by storm, despite the lack of investable options for investors who aren’t comfortable owning the tokens outright. The bigger issue, however, is whether these or any other cryptocurrencies will survive, which is critical when it comes to investing in the long term.
Needless to say, there’s a lot of disagreement about this topic. A recent report from Goldman Sachs outlined just how far apart the bulls and bears are on the matter. In fact, one Goldman analyst thinks the bitcoin price is going to zero and that no current cryptocurrencies will survive the long term. Meanwhile, Pantera Capital’s CEO sees the bitcoin price eventually at $500,000 and predicts the long-term survival not only of bitcoin, but also ethereum, ripple and some of the other early cryptocurrencies.
One of those interviewed in the Goldman report was Steve Strongin, who heads up the firm’s Global Investment Research division. He actually said that cryptocurrencies have no “intrinsic value,” although he also said that fiat currencies don’t either. What makes them valuable is the widespread belief that they do have value.
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He finds it “unlikely” that any of the cryptocurrencies in existence today will survive in the long run, also he does suggest that “parts of them may evolve and survive.” He finds digital currencies to be “too primitive to be the long-term answer” in their current forms, noting that transaction times for many of them are very slow.
Other challenges to the long-term survival of bitcoin, ethereum and other cryptocurrencies include storing them safely and keeping up with maintenance. The main reason he doubts that they will survive in the long run is because of all the innovation that is necessary to fix these problems. However, he also notes that it isn’t entirely impossible for current cryptocurrencies to survive.
“Ultimately, I think new cryptocurrencies will emerge but of course time will tell,” he told editor Allison Nathan. “As it relates to the underlying technology—blockchain or some successor to it—there is a great deal of hope that it will prove useful in a variety of ways. That may be true, but if the technology does survive, it may eventually look quite different than it does today.”
Bitcoin is often credited with being the first working cryptocurrency, although ethereum, ripple and others have been growing fast as well in recent months. When asked about whether a “first mover advantage” makes bitcoin or any of these other early cryptocurrencies likely to survive, he said he sees the idea of such an advantage in any industry “a bit archaic today.” For example, he notes that the first search engine and web browser don’t exist anymore. He also pointed out that the market hasn’t even selected an obvious winner among cryptocurrencies, as it isn’t just the bitcoin price that has been skyrocketing.
Strongin predicts that the majority of cryptocurrencies will eventually go to zero, and he doesn’t believe the market is factoring in this likelihood. He’s particularly concerned that all of them are moving together as an asset class rather than any particular one breaking out above the others.
In the same report, Pantera Capital founder and Chief Executive Dan Morehead argued the bull case for bitcoin and other cryptocurrencies. Nathan asked him about whether digital currencies that are currently in existence will survive two more decades, and he said his “passionate belief” is that most of them will. He’s very bearish on the newer altcoins and initial coin offerings, which he predicts will go to zero. However, he does expect bitcoin, ethereum and ripple to survive in the long run. He feels investors and analysts are spending too much time trying to pick a winner in the cryptocurrency wars. Instead, he feels it would be better to create a portfolio of different cryptocurrencies.