The recent $500 billion rout of most cryptos over the past month has since led to a bounce in valuation after what seemed like a perpetual decline. However, the prolonged decrease of crypto prices was a wakeup call for many investors and hodlers who had simply watched as these instruments surged unabated.
While the recent decline has done little to deter optimism in cryptocurrencies, Goldman Sachs Global Head of Investment Research, Steve Strongin, has taken a different stance altogether. Strongin not only sees grounds for a more substantial decline but possibly the total collapse of existing large cap cryptos to zero, per a Bloomberg report.
Looks like the worst is over. That was a hell of a fun ride. One of the best declines I’ve ever experienced. Now …. watch the bounce. For everyone who held, and hopefully that is the overwhelming majority of us, the rise should be just as spectacular.
— John McAfee (@officialmcafee) February 7, 2018
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Strongin is hardly the first individual to bet against crypto’s rise – indeed, many people have made a fortune on the back of these instruments over the past year, creating a new generation of wealth. However, the projection is noteworthy as he sees these instruments going to zero, leading to a total loss of value for coins.
“The high correlation between the different cryptocurrencies worries me. Because of the lack of intrinsic value, the currencies that don’t survive will most likely trade to zero,” warned Mr. Strongin.
Long way down
Such a finality would be simply catastrophic for investors given – Bitcoin presently has a market cap of $138 billion, while other leaders such as Ethereum ($80 billion) and Ripple ($29 billion) represent the most established cryptos. Rather, the projection instead calls for the displacement of these cryptos by a small set of future competing altcoins or variants.
The doom and gloom projection likens Bitcoin’s rise to that of a bubble, though this is hardly the uniform stance adopted across the industry. Despite the recent rout, cryptocurrencies have seen several notable developments such as their endorsement by the US’ CFTC, which was a huge boost for confidence following several setbacks in China and India.
The prices of Bitcoin, Ethereum, and other coins have also rebounded off of recent lows, which itself is a sign of a healthy market. Hodling and long bias have loomed as problematic trends for brokers and other venues, with a departure from this phenomenon ironically being seen as a good thing.
According to Mr. Strongin: “Are any of today’s cryptocurrencies going to be an Amazon or a Google, or will they end up like many of the now-defunct search engines? Just because we are in a speculative bubble does not mean current prices can’t increase for a handful of survivors. At the same time, it probably does mean that most, if not all, will never see their recent peaks again.”