Former Goldman exec says the coin has ‘no transparency to it’.
Don’t pin your hopes on the Bitcoin boom holding up, according to Gary Cohn, a former economic chief to Donald Trump.
“For all the reasons it’s a strong developing asset class, it may fail,” Cohn, the ex-Goldman Sachs Group Inc. honcho, said in an interview with Bloomberg Television.
“Part of the integrity of a system is knowing who owns it and knowing who has it and knowing why it’s being transferred,” Cohn said. “The Bitcoin system today has no transparency to it. So there are a lot of people that question, why would you need a system that does not have an audit trail.”
Cohn’s skepticism comes at a time the vaunted coin of the crypto community torched its previous record as the price shot up to $20,000. That’s reminiscent of the rapid ascent three years ago, when Bitcoin emerged as the breakthrough cryptocurrency promising to upend the way money changes hands forever.
It “lacks some of the basic integrity of a real market,” Cohn said. The former president of Goldman Sachs has been slowly rebuilding his presence in the business world as he looks for new ways to replicate his success on Wall Street. He was a contender for the top job at Goldman before he took a role with the Trump administration. He has been investing in cyber and blockchain.
Others have mxed sentiment about the asset.
I have changed my mind': A top market strategist and long-time crypto skeptic explains why he now believes bitcoin should be in investor portfolios.Inigo Fraser-Jenkins
Once a crypto skeptic, Bernstein Research's co-head of portfolio strategy now says bitcoin should have a place in investors' portfolios.
"I have changed my mind about bitcoin's role in asset allocation," said Inigo Fraser-Jenkins in a Monday note to clients. His take comes as the coin reaches new record highs and has seen year-to-date gains of over 160%.
But bitcoin's most recent rally isn't exactly what made Fraser-Jenkins change his mind. The strategist explained that the coronavirus pandemic has changed the policy environment, debt levels, and diversification options for investors, and that this has all made bitcoin an attractive asset.
The pandemic has resulted in increased fiscal expansion, and a higher likelihood of inflation and tax increases. These policy factors will increase the demand for bitcoin, Fraser-Jenkins said.
However, he also acknowledged a paradox that could hurt bitcoin's continued rise: "The greater role that governments will likely play in economies makes cryptos potentially more appealing. These very same forces also may hinder crypto. If they get in the way of policy implementation, then governments might seek to constrain them," he said.
Fraser-Jenkins doubts that governments will outlaw cryptocurrencies. He said that in order for this to happen, cryptos would need to get in the way of reflationary policy efforts from the government. At the moment, cryptos are too small to have an effect like this, said Fraser-Jenkins.
He added: "The attractions of cryptos are what also make them potentially an annoyance for policymakers. Cryptos do have a place in asset allocation….for as long as they are legal!"
Fraser-Jenkins also changed his mind on bitcoin because the data on the cryptocurrency has changed since three years ago. The strategist said that bitcoin's volatility has significantly declined in the last three years, which marks it a more attractive store of value. Also, the relative volatility of bitcoin to both gold and stocks has declined to historically low levels, he said.
The debate continues,