Bitcoin Bubble Surpasses Dotcom and Tulip Mania, Goldman Sachs‎ Warns

The firm went on to say that ‎Bitcoin is reminiscent of the tulip mania in Holland in ‎the 1640s‎.

Goldman Sachs’s investment management arm has issued a warning ‎stating the sharp swings of digital currencies, specifically Bitcoin, over the ‎past year “has pushed it into bubble territory.”‎

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The news preceded a 30% reduction in Bitcoin’s price last week, which has ‎since recovered over the course of the weekend to resume recovery attempts ‎as the price hovers in the region of $11,000.

The firm went on to say that ‎Bitcoin reminds of the tulip mania in Holland in the 1640s, adding that it ‎doesn’t believe the cryptocurrencies will retain their value in the long run in ‎their current incarnation.

The price surge has also fuelled concerns ‎among Goldman’s analysts of a bubble ‎and drawn comparisons with the ‎dotcom mania of two decades ago‎, and cautioned that the bubble may burst.‎‎

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‎“Bitcoin’s meteoric rise in a short time has dwarfed the rise seen during the dot-‎com bubble.‎ We also believe that cryptocurrencies have moved beyond bubble levels in financial markets, ‎and even beyond the levels seen during the Dutch ‘tulipmania’ between 1634 and early ‎‎1637,” Goldman wrote.‎

Tulip mania was a craze in the Netherlands in the 17th century which saw ‎the price of the flower skyrocket, and ultimately resulted in a crash of that market.‎

The warning was prefixed by a statement: “We think the concept of ‎a digital currency that leverages the blockchain technology is viable given ‎the benefits it could provide: ease of execution globally, lower transaction ‎costs, reduction of correction since all transactions could be traced, safety of ‎ownership, and so on. But bitcoin does not provide any of these qualities.”‎

Despite pessimism, Goldman opens a crypto trading desk

Big banks have dabbled in blockchain technology, which underpins Bitcoin, and ‎acknowledged its potential to reshape the investment and banking industries. But ‎they were mostly wary of venturing directly into making markets for such digital ‎assets that have been used extensively on darkweb marketplaces‏.‏

Goldman’s‎ comments follow similar warnings from several banks and ‎regulators, that cautioned investors that they should be prepared to lose ‎everything if they bought Bitcoin.

Nevertheless, Goldman Sachs was reportedly opening a trading desk dedicated to Bitcoin ‎and ‎other digital currencies by the end of June, if not earlier. The action also makes the ‎investment bank the first blue-chip Wall Street ‎firm opening a dedicated cryptocurrency ‎trading desk. This openness to ‎deal directly in this burgeoning yet controversial market is also ‎quite ‎interesting, especially considering that Goldman Sachs’ CEO Lloyd ‎Blankfein repeatedly ‎stated that he is still not a believer in Bitcoin ‎technology.‎

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