Goldman Sachs: Bitcoin will eventually lose its "crown" and be replaced by Ethereum

Goldman Sachs believes that Ethereum is likely to replace Bitcoin as the mainstream cryptocurrency, considering multiple factors such as real use, user base, and technology iteration speed.

In terms of market trends, Goldman Sachs emphasized that the key difference between the current cryptocurrency market and the 2017-2018 bull market is the participation of institutional investors. However, with the recent slowdown in the participation of institutional investors (decrease inflows into cryptocurrency ETFs) and the emergence of altcoins, the market has once again been dominated by retail investors.

Goldman Sachs said this shift from institutions to retail investors is increasing the likelihood of a market crash. The current high volatility in the market will continue until cryptocurrencies have underlying real economic use independent of price.

Ethereum has great potential

Goldman Sachs said the ethereum system supports smart contracts and provides a way for developers to create new applications. Most decentralized finance (DeFi) applications today are built on the Ethereum network, and most non-fungible tokens (NFTs) are also purchased using Ethereum.

Goldman Sachs: There is currently no plan to issue Goldman Sachs tokens: According to news on January 28, a spokesperson for Goldman Sachs said that there is currently no plan to issue Goldman Sachs tokens. Yet the banking giant is working with private partners to create the stablecoin. “We continue to see value in working closely with private institutions looking to create a common stablecoin that meets legal/regulatory requirements and has transparent governance,” the spokesperson said.

In 2020, Matthew McDermott, global head of digital assets at Goldman Sachs, said the bank was seriously considering its own cryptocurrency, possibly a stablecoin. He also hinted at possible partnerships with social media giant Facebook (now Meta) or JPMorgan Chase, which launched its own internal digital token JPM coin in 2020. (CoinDesk) [2022/1/28 9:19:23]

Compared to Bitcoin, Ethereum has a higher transaction volume. As Ethereum becomes more widely used in DeFi and NFT, Ethereum will establish itself as a first-mover advantage in the application of encryption technology.

Goldman Sachs: Ethereum will eventually replace Bitcoin as the most mainstream cryptocurrency: Goldman Sachs said that Ethereum will eventually replace Bitcoin as the most mainstream cryptocurrency. Ethereum "currently looks like the cryptocurrency with the most potential for practical use, because the native digital currency platform where Ethereum is located is also the most popular smart contract application development platform." (Golden Ten) [2021/7/10 0:40:46]

Goldman Sachs emphasized that Ethereum can also safely and privately store almost any information on a decentralized ledger. This information can be tokenized and traded. This means that the Ethereum platform has the potential to become a large marketplace for trusted information.

At present, investors can already sell digital art and collectibles online through NFT, but this is only a small part of its practical use.

Goldman Sachs sees a future where individuals can store and sell their medical data to pharmaceutical research companies via ethereum. Digital profiles on Ethereum may contain personal data, including asset ownership, medical history, and even intellectual property.

Goldman Sachs: Ethereum may replace Bitcoin as the dominant store of value: May 23 news, investment banking giant Goldman Sachs recently stated in its "Global Macro Research" report that given the importance of practical use in determining value stores , Ethereum is likely to replace Bitcoin as the dominant store of value. The Ethereum ecosystem supports smart contracts and provides a way to create new applications on top of its platform. Most DeFi applications are built on the Ethereum network, and most non-fungible tokens (NFTs) issued are purchased using Ethereum. Ethereum has a larger number of transactions compared to Bitcoin, an advantage that is more reflective of dominance. (coingape) [2021/5/23 22:34:47]

Ethereum also has the benefit of being a decentralized global base server. Unlike centralized servers like Amazon or Microsoft, this may offer a solution for sharing personal data.

Bitcoin is not scarce enough to support its function as a store of value

The main argument in favor of Bitcoin as a store of value in the market is its limited supply. But Goldman Sachs believes that it is demand, not scarcity, that drives success as a store of value.

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There is a stable supply of the major price store assets in the market today: the supply of gold has been growing at a rate of close to 2% for centuries, but gold is still a recognized store of value. A rare element like osmium is not a store of value.

Goldman emphasized that a fixed and limited supply could spur hoarding, forcing new buyers to outbid existing ones, driving up price volatility and creating financial bubbles. Reducing sharp and unpredictable growth in new supply is more important than maintaining value with a limited supply. There is currently no upper limit to the total supply of Ethereum, but there is a limit to the growth of the annual supply, which meets this standard.

Rapidly evolving technology breaks first-mover advantage

Proponents of bitcoin's dominance of the cryptocurrency market see its first-mover advantage and large user base.

But Goldman Sachs pointed out that history has proven that in an industry with ever-changing technology and growing demand, it is difficult to maintain the first-mover advantage. If incumbents fail to adapt to changing consumer preferences or technological advances from their competitors, they risk losing their dominance (Yahoo vs Google).

The current number of active-zce users in the cryptocurrency market as a whole is very unstable. In this environment, encryption technology is also changing rapidly, and systems that cannot be upgraded quickly can become obsolete.

In terms of user base, Ethereum gained a large active-zce user base in 2017, and the current user base has reached 80% of the scale of Bitcoin.

In terms of technology, Ethereum is currently rapidly upgrading its protocol (faster than Bitcoin), transitioning from Proof of Work (PoW) to Proof of Stake (PoS).

According to Goldman Sachs, the advantage of PoS is that it can greatly improve the energy efficiency of the system, rewarding miners according to the amount of ether they choose to hold (rather than their processing power), which will end the burning competition for miner rewards.

At present, the energy consumption of Bitcoin has reached the national energy consumption of the Netherlands. If the price of Bitcoin rises to $100,000, its energy consumption may double. This makes bitcoin investing challenging from an ESG perspective.

In terms of security and stability, Goldman Sachs said that all cryptocurrencies are still in their early stages, with rapid technological changes and unstable user bases.

Although there are security issues in the verification process of the Ethereum PoS protocol, Bitcoin is not 100% safe. At present, the top four bitcoin mining pools control nearly 60% of the bitcoin supply, and the excessive concentration leads to the possibility of false transactions.

Ethereum also faces many risks, and its dominance is not guaranteed. For example, if the Ethereum 2.0 upgrade is delayed, developers may choose to move to a competing platform.

The market will continue to fluctuate until real value in use emerges

Goldman Sachs pointed out that the key difference between the current cryptocurrency market and the 2017-2018 bull market is the presence of institutional investors: a sign that financial markets are beginning to embrace cryptocurrency assets.

Bitcoin’s volatility has remained high, with prices down 30% in a single day over the past week.

At the same time, the recent participation of institutional investors has slowed down (decrease inflows into cryptocurrency ETFs), while the emergence of altcoins is endless, suggesting that the market is once again dominated by retail investors.

Goldman Sachs believes that this shift from institutions to retail investors is increasing the possibility of a market crash. The current high volatility in the market will continue until cryptocurrencies have underlying real economic use independent of price. This will usher in a new era of cryptocurrencies.

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