Bitcoin rallies 4% despite Goldman slamming

By: Michael Harris
Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to… read more.
on May 29, 2020
  • 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.”

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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. 

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