Bitcoin is a vehicle for fraudsters, warns Goldman Sachs boss

The boss of Goldman Sachs became the latest high-profile critic of bitcoin, claiming it is a vehicle to commit fraud as the value of the cryptocurrency plunged 20% in less than 24 hours.

Lloyd Blankfein, chief executive of the US investment bank, said the client would “call somebody else” if they asked for exposure to bitcoin.

Bitcoin is the first, and the biggest, "cryptocurrency" – a decentralised tradable digital asset. Whether it's a bad investment is the $97bn question (literally, since that's the current value of all bitcoins in existence). Bitcoin can only be used as a medium of exchange and in practice has been far more important for the dark economy than it has for most legitimate uses. The lack of any central authority makes bitcoin remarkably resilient to censorship, corruption – or regulation. That means it has attracted a range of backers, from libertarian monetarists who enjoy the idea of a currency with no inflation and no central bank, to drug dealers who like the fact that it's hard (but not impossible) to trace a bitcoin transaction back to a physical person.

“Something that moves 20% [overnight] does not feel like a currency,” Blankfein said on Bloomberg television. “It is a vehicle to perpetrate fraud.”

His comments came during another wildly volatile trading session for the digital currency, which plunged by over $2,000 in a 24-hour period. Having topped $11,000 to a reach new record high of $11,395 on Wednesday, it fell to a low of $9,000 on Thursday, before picking up slightly later in the day.

Blankfein said Goldman did not need to have a bitcoin strategy, adding the digital currency would need to be a lot less volatile and a lot more liquid to justify closer attention.

“When do I have to have a bitcoin strategy? Not today. Life must be really rosy if that is what we are talking about,” he said. “Bitcoin is not for me. A lot of things that have not been for me in the past 20 years have worked out, but I am not guessing that this will work out.”

Blankfein is the latest boss of a major bank to voice scepticism about bitcoin, after JP Morgan chief executive Jamie Dimon described it as fraud that would ultimately blow up and said it was only fit for use by drug dealers, murderers and people living in places such as North Korea.

On Wednesday, Sir Jon Cunliffe, a deputy governor of the Bank of England, said the digital currency was too small to pose a systemic threat to the global economy. He also cautioned that bitcoin investors “need to do their homework”.

Despite the fall in bitcoin’s value on Thursday, it remained far higher than it was at the start of 2017, when it was trading at $998. It is the biggest gainer of all asset classes this year, prompting sceptics to declare it a classic speculative bubble that could burst.

Banks and other financial institutions remain concerned about bitcoin’s early associations with money laundering and online crime. Unlike traditional currencies, bitcoin is not issued or regulated by a central bank or government.

bitcoin

Lee Wild, head of equity strategy at online trading company Interactive Investor, said the volatility in bitcoin trading was “wild west stuff”.

“Cryptocurrency land’s extreme volatility is like catnip to high-risk traders, and even traditional investors are dipping their toe. Given there’s no logical way to value them with any accuracy, this remains wild west stuff.”

Analysts at the spread betting firm, City Index, said: “While traditional assets are experiencing historically low levels of volatility, the whipsaw action of the bitcoin is drawing the attention of traditional traders. Meanwhile existing traders and newcomers are increasingly interested in fear of missing out.”

Powered by Guardian.co.ukThis article was written by Angela Monaghan, for theguardian.com on Thursday 30th November 2017 18.25 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010

 

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