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Sharmin Mossavar-Rahmani is the CIO of the Private Wealth Management Group at Goldman Sachs and is responsible for multi-million dollar trust investments. . According to the transcript of an interview, cryptocurrencies have been a hot topic for the company with investors eager to find out more about them and the blockchain technology they use. While the company recognizes the potential of blockchain technology, the company is not surprisingly bearish with regard to the totally decentralized currencies that currently exist.
“We believe that if we like the concept of blockchain, and think that it will evolve into a useful tool for businesses, for the financial sector, we believe that cryptocurrencies in their current format, this which means that in the present incarnation, are in a bubble. “
She then compared the current situation to a series of well-known bubbles, such as TOPIX in 1990, Nasdaq in 2000, and even the tulip mania of the 1600s – describing cryptocurrencies as “astronomically” more than a bubble .
Later in the report, however, Mossavar-Rahmani appears to contradict this claim, recognizing that crypto-currencies actually represent less than 1% of global GDP (the current total market is capped at $ 0.5 billion). To put it in perspective, Gold currently has an estimated market capitalization of $ 8 billion, and the 2000 Internet bubble is estimated at $ 7 billion. To go further, we can look at the global financial crisis of 2008, caused by excessive risk taking by the banking group Lehman Brothers and an extremely inflated housing market. Subprime mortgages of dubious value were sold at a huge premium – swelling the market tremendously. When he crashed, $ 6 of investors’ money went missing with him.
It is also interesting to note that investments in gold and housing are all speculative, while crypto-currencies are beginning to offer real features that are likely to disrupt industries at all levels, including the financial sector. This fact can be at the heart of the fear, uncertainty and doubt emanating from the big financial institutions. Decentralized virtual currencies are not controllable, and large banks can not receive huge payments from a federal reserve on a regular basis. The comments of Mossavar-Rahmani today certainly imply this:
“Is there room for a digital currency, perhaps 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 those. “
Here, “these” refer to uncontrollable currencies by the banking and government authorities. This is a clear sign that the financial industry is beginning to worry about the development of cryptocurrencies that take away their economic power. It’s an idea that is based on the early-week revelations, when a Goldman Sachs memo to the SEC was leaked stating that the institution “could be or could be at risk.” related to Distributed Register Technology “. Goldman Sachs is not the only institution increasingly worried, earlier this month it was revealed that Bank of America considers cryptocurrencies as a fundamental threat to their business model.
Centralized financial institutions are right to fear cryptocurrence. Currently, they wield enormous power over the world’s citizens, able to maximize profits in increasingly dangerous financial games. When the bubble bursts and the global economy collapses over years of decline, taxpayers must step in and bail out banks for thousands of billions of dollars. With virtual currencies, centralized authorities are becoming increasingly superfluous as citizens become able to borrow, lend and invest in a decentralized, reliable and inexpensive global network.
While the rise of cryptocurrency has certainly been dazzling and the current market is still largely speculative, the notion that it is the biggest economic bubble in history is an attempt shameful to spread fear, uncertainty and doubt. This is a clear indication of a very worried centralized system facing a future in which it has no place.
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