Bitcoin price plunged by 14 per cent after South Korean police raided major cryptocurrency exchanges.
In a report titled Bitcoin as Money, Goldman Sachs recognised the cryptocurrency as a form of money that will be able to succeed, but only in emerging markets.
The reports stated: “Bitcoin may offer viable alternatives in countries and corners of the financial system where the traditional services of money are inadequately supplied.”
But cryptocurrencies are not expected to replace successful currencies like the dollar, wrote the Goldman Sachs’ economists.
Traditional forms of money will be able to work with blockchain technology with better results than cryptocurrencies.
The report outlined how bitcoin is better compared to gold, as gold, too, is not considered money but can easily be converted into cash.
Bitcoin is not there yet. Transactions can take over three days to settle. Other cryptocurrencies like Ripple can take weeks just to purchase.
The economists wrote: “Our working assumption is that long-run cryptocurrency returns should be equal to — or slightly below — growth in global real output.
“Digital currencies should be thought of as low/zero return or hedge-like assets, akin to gold.”
As the cryptocurrency continues to be a tool for criminals and tax evaders, its popularity will ultimately attract greater regulation and law enforcement action by governments.
In an interview with CNBC, Matt Maley of Miller Tabak said: “There is a reason the Government of the United States likes the fact that somebody has control or at least some sort of impact over our currency.
“A currency that people don’t have any kind of control over sounds very good in theory but there is a lot of people in governments who will say ‘wait a minute here’.”