Bitcoin rallies 4% despite Goldman slamming

Bitcoin rallies 4% despite Goldman slamming
  • Bitcoin gains 4% to trade around the $9,500 mark
  • Goldman Sachs lists 5 reasons why you shouldn’t invest in Bitcoin
  • Buyers are now looking to build on this week’s gains and push the price above $10,000

Bitcoin closed 4% higher for the second consecutive day as the buyers aim for a trip above $10,000. This is despite Goldman Sachs listing 5 reasons why an investor shouldn’t buy Bitcoin. 

Fundamental analysis: Bitcoin is not an asset class, clasim Goldman

Goldman Sachs, the US-based banking giant, slammed Bitcoin in a leaked slideshow on Wednesday, saying the world’s number one cryptocurrency “is not an asset class,” nor “a suitable investment.”

The bank listed 5 reasons why you shouldn’t invest in Bitcoin:

  • 1. It doesn’t produce cash flow like bonds.
  • 2. It doesn’t generate profit through exposure to global economic development.
  • 3. Bitcoin doesn’t deliver consistent diversification gains due to unstable correlations.
  • 4. It doesn’t increase volatility given historical volatility of 76%. The bank noted the case when Bitcoin plunged 37% in a single day, alleging that its volatility is off the charts. 
  • 5. It provides no proof of hedging against inflation. 

The bank added that despite the fact that hedge funds may be interested in trading cryptocurrencies due to high volatility, that’s not a big enough reason to invest in them. 

Bitcoin fans argue that BTC is scarce, comparing it to gold because there is a limited supply of it. The bank disagrees with this argument as well, saying that digital currencies, in general, are not scarce assets.

“We believe that a security whose appreciation is primarily dependent on whether someone else is willing to pay a higher price for it is not a suitable investment for our clients,” Goldman Sachs wrote.

“We also believe that while hedge funds may find trading cryptocurrencies appealing because of their high volatility, that allure does not constitute a viable investment rationale.”

In addition to that, Goldman Sachs also pointed to the fact that there are a few thousand cryptocurrencies in the world with a total market value of roughly $250 billion and 3 of the big six cryptocurrencies are almost identical replicas – Bitcoin, Bitcoin Cash and Bitcoin SV. 

Ultimately, the bank indicated legal issues surrounding Bitcoin as it’s often being used as a conduit for illegal actions. There are a number of examples where Bitcoin has been used for buying illegal goods on the darknet, money laundering, Ponzi schemes and more.

Technical analysis: Buyers eye $10,000

Despite Goldman’s claims, Bitcoin surged 4% yesterday after recording similar gains on Wednesday. The coin has now returned above the $9,200 horizontal resistance as the buyers aim for a trip above $10,000.

BTC/USS daily chart (TradingView)

The key resistance zone for Bitcoin is located between $10,300 and $10,500. A clean brake above this level would translate into the new 20-month high for the world’s largest digital coin. In this case, the $11,000 mark would become the next target for the bulls as a break of $10,000 would facilitate a new buying opportunity for Bitcoin investors. 

Summary

Bitcoin price jumped 4% higher to trade above the $9,200 mark again. The buyers are now looking to press the price action higher above $10,000 again, despite Goldman’s claims that Bitcoin is not an asset class and arguing against investments into the world’s largest digital coin. 

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.
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