Goldman Sachs’ Chief Investment Strategist Sees Crypto Bubbles; Even with Ethereum

A Goldman Sachs top executive came out strongly about cryptocurrencies this week, saying that not only is Bitcoin a bubble, but Ethereum is too.

During an interview with Business Insider, Sharmin Mossavar-Rahmani, Goldman’s CIO of the Private Wealth Management, said this about cryptos, while at the same time saying they could be ‘extremely useful.’

Let’s go over these seemingly contradicting statements.

The bubble few are discussing

Mossavar-Rahmani echoed the sentiments of many in the traditional banking and investment community, as far as the enthusiasm for Blockchain versus Bitcoin.

“Our view is that while we like the concept of Blockchain, and think it will evolve into a useful tool for companies, for the financial industry, we think cryptocurrencies in their current format, meaning that in the current incarnation, are in a bubble.”

Mossavar-Rahmani went a step further, and discussed Ethereum being a bubble, too. She said the following about what Goldman determined about Ether when it compared its prices to those of Bitcoin.

“…these valuations don’t make sense to us. In addition, we think that these currencies have major shortcomings. Is there room for a digital currency, maybe sponsored by one of the major central banks like the Federal Reserve? Yes. Could it be incredibly useful? Could it reduce transaction costs? Yes. But not these ones.”

Mossavar-Rahmani also noted how cryptocurrencies are a much smaller part of the global economy. Whether you compare it to the U.S. GDP or the global GDP, it’s less than one percent of global GDP, she said, and added that they will still have some impact.

“There are a lot of people who have set up various exchanges, infrastructure, hedge funds in that space, so obviously, they will get hurt. But it’s a very, very small part of global GDP.”

All about Blockchain

Allison Nathan, senior strategist for Global Investment Research at Goldman Sachs, commented about the space in a video recently posted on the investment bank’s website. In it, Nathan said:

“We are optimistic that Blockchain, the distributed technology that underpins digital currencies, could have a meaningful and important impact across industries. But as the debate over crypto pricing itself continues, we would take a fairly cautious view.”

In noting how cryptocurrencies are a hot topic, Mossavar-Rahmani said that Goldman has a point person on staff whose job is dedicated to discussing Blockchain with clients.

“One of our colleagues, Mary Rich, has actually spent a lot of time on it and — she’s so much in demand, because everybody wants to talk to her and learn more about cryptocurrencies, learn about Blockchain.”

Crypto Destroyer

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