goldman_sachs_bitcoin

Top of Mind: Is Bitcoin a (Bursting) Bubble?

The dramatic rise (and fall) in cryptocurrency prices over the past several months has sparked a debate about whether Bitcoin and its peers are overvalued. The key to determining fair value, says Allison Nathan, senior strategist for Goldman Sachs Research, is identifying the economic problems cryptocurrencies solve—an exercise that leaves Goldman Sachs economists cautious. “In most areas of the world where we have well-functioning fiat currencies and reliable banking systems, there just doesn’t seem to be a need for digital currencies,” Nathan says, though she notes that Goldman Sachs Research remains optimistic that blockchain, cryptocurrencies’ underlying distributed ledger technology, can have a transformative impact across a wide range of industries.

Our Thinking Article links

• 

Allison Nathan

Senior Strategist, Global Investment Research, Goldman Sachs

We are optimistic that blockchain, the distributed technology that underpins digital currencies, could have a meaningful and important impact across industries. But as the debate over crypto pricing itself continues, we would take a fairly cautious view.

Featured content

Our Thinking Blockchain: The New Technology of Trust

At its core, a blockchain is a transparent and secure record of transactions. Take an interactive tour of how the technology works and start to envision its potential for redefining the nature of everyday transactions. Explore Infographic

BRIEFINGS Weekly Insights from Goldman Sachs

Sign up for BRIEFINGS, a weekly email about trends shaping markets, industries and the global economy. Sign Up

© Copyright 2018 Goldman Sachs, All Rights Reserved

GOLDMAN SACHS: Bitcoin is looking 'heavy'

Bitcoin has had a blistering start to 2017. It's up about 180% so far this year. However, its near-term outlook isn't looking so hot, according to a note released on Monday by Goldman Sachs head of technical strategy Sheba Jafari.

"The market has come close (enough?) to reaching its extended (2.618) target for a 3rd of V-waves from the inception low at 3,134," Jafari wrote. "It's on track to forming a bearish key day reversal if today's close settles below 2,749."

Bitcoin hit a lifetime high of nearly $3,000 a coin on Monday, but was unable to hold onto those gains. The cryptocurrency finished the day at $2,599, well below the key technical threshold of $2,749 that was singled out by Jafari.

Now, traders should be paying close attention to $2,475 on a weekly basis, as a close below there would cause even more damage to the technical picture, according to Jafari. "Both daily/weekly oscillators are diverging negatively. All of this to say that the balance of signals are looking broadly heavy."

Goldman Sachs

Jafari isn't alone in calling for at least a near-term top in the cryptocurrency. "I think it's in a bubble," tech billionaire Mark Cuban tweeted last Tuesday. "I just don't know when or how much it corrects. When everyone is bragging about how easy they are making $=bubble." Cuban did not say how far he thought bitcoin would fall.

So where will bitcoin go from here? "Wary of a near-term top ahead of 3,134, Jafari concludes. "Consider re-establishing bullish exposure between 2,330 and no lower than 1,915."

Get the latest Bitcoin price here.>>

Get the latest Goldman Sachs stock price here.

This Is What Goldman Sachs Is Telling Big Money Clients About Bitcoin

Goldman Sachs Group Inc. is acknowledging that it’s getting harder for institutional investors to ignore the cryptocurrency market with total assets ballooning to $120 billion and bitcoin soaring more than 200 percent this year.

“Whether or not you believe in the merit of investing in cryptocurrencies (you know who you are), real dollars are at work here and warrant watching,” analysts including Robert Boroujerdi and Jessica Binder Graham wrote in a Q&A sent to clients.

The debate has shifted from the legitimacy of the “fiat of the Internet” to how fast new entrants are raising funds, with initial coin offerings and fundraising that now exceeds Internet angel and seed investing. These are some of the questions the Goldman Sachs analysts answered:

How to Trade Cryptocurrencies in the U.S.?

Digital exchanges and block trades, and options will be coming soon. While individual investors can trade virtual coins on various online exchanges, institutional traders have largely stayed out of the cryptocurrency market due to its relatively small size, structure of mandates and volatility. But block trading exists to facilitate the execution of larger orders. In addition, Bitcoin options exist and are traded on offshore exchanges, and could be traded in the U.S. by the end of the year.

Are Cryptocurrencies a Currency or a Commodity?

Coins have attributes of a currency, as they’re presented and trusted by some medium of exchange, and of a commodity, as they’re a limited resource. The classification of cryptocurrencies varies by country, government and even application. In the U.S., the Internal Revenue Service has ruled that virtual currency does not have legal tender status in any jurisdiction. For tax purposes, the IRS treats virtual currency as property.

What is Ethereum?

A platform first, and a cryptocurrency second. Unlike bitcoin, which is designed to be an alternative to “real money,” Ethereum is more of a platform set up to run any decentralized application and automatically execute “smart contracts” when certain conditions are met. Ethereum offers a digital currency called ether, but this is just one component of its smart contract execution and primarily used to facilitate and reward using the network. The rise of ethereum has not come without setbacks, including the $60 million hack of a venture capital-like organization called “The DAO.”

What is an Initial Coin Offering (ICO)?

A fundraiser through token sales. The amount of money funding ICOs has grown exponentially and the speed at which cash is raised with often little more than a white paper and Internet browser has sounded the alarm bells from parties including the Securities and Exchange Commission and the People’s Bank of China. According to Coin Schedule, ICOs have raised $1.25 billion this year, outpacing global angel and seed stage Internet venture capital funding in recent months.

What the Goldman strategists didn’t address is whether institutional investors should be buying cryptocurrencies or not.

Goldman Sachs Launching Bitcoin Futures Trading Operation Within Weeks

Goldman Sachs is reportedly launching a bitcoin trading operation where it will trade bitcoin futures contracts on behalf of clients using its own money, starting as early as the next few weeks. The Wall Street investment firm will also offer its own bitcoin futures product to clients.

Goldman Gets into Bitcoin

According to the New York Times, Goldman Sachs is gearing up to launch a trading operation to buy and sell bitcoin futures for institutional clients. Reporter Nathaniel Popper wrote:

In the next few weeks — the exact start date has not been set — Goldman will begin using its own money to trade bitcoin futures contracts on behalf of clients. It will also create its own, more flexible version of a future, known as a non-deliverable forward, which it will offer to clients.

There were rumors last year of the firm planning to launch a cryptocurrency trading desk, such as a December Bloomberg article, citing people with knowledge of the strategy.

In January, CEO Lloyd Blankfein put an end to the rumors of Goldman Sachs launching a bitcoin trading desk, declaring that as far as “a principal bitcoin business where we’re going long and short bitcoin, market making, so far we’re not.” Nonetheless, CNBC quoted him admit that “we’re clearing futures in bitcoins for some of our futures clients. We’d clear them. We’re a prime broker and so if our clients are going to do it, we’re going to go do it.”

Clients Requests

Rana Yared, one of Goldman’s executives overseeing the creation of the trading operation, was interviewed by the New York Times. She conveyed to the publication, “the bank had received inquiries from hedge funds, as well as endowments and foundations that received virtual currency donations from newly minted bitcoin millionaires and didn’t know how to handle them.” Citing that “the ultimate decision to begin trading bitcoin contracts was approved by Goldman’s board of directors,” she was then quoted:

It resonates with us when a client says, ‘I want to hold bitcoin or bitcoin futures because I think it is an alternate store of value.

While her team had reservations about getting involved with bitcoin, Yared explained that “Goldman had concluded that bitcoin is not a fraud and does not have the characteristics of a currency,” the news outlet conveyed, adding that “A number of clients wanted to hold it as a valuable commodity, similar to gold, given the limited quantity of bitcoin that can ever be ‘mined’ in a complex, virtual system.”

Commenting on the risks involved with dealing in cryptocurrencies, she detailed, “it is not a new risk that we don’t understand… It is just a heightened risk that we need to be extra aware of here.” Popper elaborated:

While Goldman will not initially be buying and selling actual bitcoins, a team at the bank is looking at going in that direction if it can get regulatory approval and figure out how to deal with the additional risks associated with holding the virtual currency.

What do you think of Goldman Sachs launching a bitcoin futures trading operation? Let us know in the comments section below.

Images courtesy of Shutterstock, Goldman Sachs, and Pixabay.

Need to calculate your bitcoin holdings? Check our tools section.

Goldman Sachs to Open a Bitcoin Trading Operation

SAN FRANCISCO — Most big banks have tried to stay far away from the scandal-tainted virtual currency Bitcoin.

But Goldman Sachs, perhaps the most storied name in finance, is bucking the risks and moving ahead with plans to set up what appears to be the first Bitcoin trading operation at a Wall Street bank.

In a step that is likely to lend legitimacy to virtual currencies — and create new concerns for Goldman — the bank is about to begin using its own money to trade with clients in a variety of contracts linked to the price of Bitcoin.

While Goldman will not initially be buying and selling actual Bitcoins, a team at the bank is looking at going in that direction if it can get regulatory approval and figure out how to deal with the additional risks associated with holding the virtual currency.

Rana Yared, one of the Goldman executives overseeing the creation of the trading operation, said the bank was cleareyed about what it was getting itself into.

“I would not describe myself as a true believer who wakes up thinking Bitcoin will take over the world,” Ms. Yared said. “For almost every person involved, there has been personal skepticism brought to the table.”

Still, the suggestion that Goldman Sachs, among the most vaunted banks on Wall Street and a frequent target for criticism, would even consider trading Bitcoin would have been viewed as preposterous a few years ago, when Bitcoin was primarily known as a way to buy drugs online.

Bitcoin was created in 2009 by an anonymous figure going by the name Satoshi Nakamoto, who talked about replacing Wall Street banks — not giving them a new revenue line.

Over the last two years, however, a growing number of hedge funds and other large investors around the world have expressed an interest in virtual currencies. Tech companies like Square have begun offering Bitcoin services to their customers, and the commodity exchanges in Chicago started allowing customers to trade Bitcoin futures contracts in December.

But until now, regulated financial institutions have steered clear of Bitcoin, with some going so far as to shut down the accounts of customers who traded Bitcoin. Jamie Dimon, the chief executive of JPMorgan Chase, famously called it a fraud, and many other bank chief executives have said Bitcoin is nothing more than a speculative bubble.

Ms. Yared said Goldman had concluded that Bitcoin is not a fraud and does not have the characteristics of a currency. But a number of clients wanted to hold it as a valuable commodity, similar to gold, given the limited quantity of Bitcoin that can ever be “mined” in a complex, virtual system.

“It resonates with us when a client says, ‘I want to hold Bitcoin or Bitcoin futures because I think it is an alternate store of value,’” she said.

Ms. Yared said the bank had received inquiries from hedge funds, as well as endowments and foundations that received virtual currency donations from newly minted Bitcoin millionaires and didn’t know how to handle them. The ultimate decision to begin trading Bitcoin contracts went through Goldman’s board of directors.

The step comes with plenty of uncertainties. Bitcoin prices are primarily set on unregulated exchanges in other countries where there are few measures in place to prevent market manipulation.

Since the beginning of the year, the price of Bitcoin has plunged — and recovered significantly — as traders have faced uncertainty about how regulators will deal with virtual currencies.

“It is not a new risk that we don’t understand,” Ms. Yared said. “It is just a heightened risk that we need to be extra aware of here.”

Goldman has already been doing more than most banks in the area, clearing trades for customers who want to buy and sell Bitcoin futures on the Chicago Mercantile Exchange and the Chicago Board Options Exchange.

In the next few weeks — the exact start date has not been set — Goldman will begin using its own money to trade Bitcoin futures contracts on behalf of clients. It will also create its own, more flexible version of a future, known as a non-deliverable forward, which it will offer to clients.

The bank’s first “digital asset” trader, Justin Schmidt, joined Goldman two weeks ago to handle the day-to-day operations, a hiring that was first reported by Tearsheet. In his last job, Mr. Schmidt, 38, was an electronic trader at the hedge fund Seven Eight Capital. In 2017, he left that job to trade virtual currencies on his own.

He will initially be placed on Goldman’s foreign currency desk because Bitcoin trading has the most similarity to movements in emerging market currencies, Ms. Yared said.

Mr. Schmidt is looking at trading actual Bitcoin — or physical Bitcoin, as it is somewhat ironically called — if the bank can secure regulatory approval from the Federal Reserve and New York authorities.

The firm also has to find a way to confidently hold Bitcoin for customers without its being stolen by hackers, as has happened to many Bitcoin exchanges. Mr. Schmidt and Ms. Yared said the current options for holding Bitcoin for clients did not yet meet Wall Street standards.

Goldman is known for pushing the envelope in the trading of complicated products. The firm faced significant criticism after the financial crisis for its profitable trading of so-called synthetic derivatives tied to the subprime mortgage markets.

Since the crisis, Goldman has made a big push to position itself as the most technologically sophisticated firm on Wall Street. Among other things, it has started an online lending service, known as Marcus, that has brought the firm into contact with retail customers for the first time. The virtual currency trading, though, will be available only to big institutional investors.

Mr. Schmidt said Goldman’s sophistication was a big part of the reason he was open to the job, despite many other opportunities in the virtual currency world.

“In terms of having a trusted institutional player, it has been something I have been looking for in my own crypto trading — but it didn’t exist,” he said.

Follow Nathaniel Popper on Twitter: @nathanielpopper

Goldman Sachs Report Warns Investors of Bitcoin 'Bubble'

Goldman Sachs has claimed that bitcoin is a bubble bigger than the dot-com era and the famous Dutch tulip mania.

In a research letter to investors, the banking firm's analysts warned about the increase in cryptocurrency values, highlighting the price moves in bitcoin and ether, as well as the stock price increases for companies which pivot to blockchain.

One example, The Crypto Company, saw its price jump more than 17,000 percent before the U.S. Securities and Exchange Commission halted trading, according to the report.

The mania is surprising, the authors say, because the world's largest cryptocurrency by market cap, bitcoin, does not fulfill the role it set out for itself.

The report states:

"We think the concept of a digital currency that leverages blockchain technology is viable given the benefits it could provide: ease of execution globally, lower transaction costs, reduction of corruption since all transactions could be traced, safety of ownership, and so on. But bitcoin does not provide any of these key advantages."

A single bitcoin transaction can take up to 10 days to process, and the value of a single bitcoin varies depending on which exchange a user conducts their transaction through, according to the report. There was a greater than $4,000 difference in the price of a bitcoin between different exchanges at the same time late last year, it adds. This meant that one user could be paying 31 percent more for a bitcoin on one exchange than another.

High transaction costs are another issue, the report argues.

However, despite the inflation of bitcoin and other cryptocurrencies, there is no risk that they will impact the U.S. or global economies, even in the event of a crash, according to the report.

While cryptocurrencies make up only a tiny fraction of U.S. and world GDPs (3.2 percent and 0.8 percent, respectively), the dot-com bubble was much more significant in the U.S. and globally (101 percent and 31 percent, respectively), according to the letter.

The authors add that they do not believe a collapse in bitcoin prices would have "major contagion effects on the global economy or financial markets," concluding that "we view the
unsteady cryptocurrencies as no match for the 'Steady as She Goes' dollar."

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

US Search Mobile Web

Welcome to the Yahoo Search forum! We’d love to hear your ideas on how to improve Yahoo Search.

The Yahoo product feedback forum now requires a valid Yahoo ID and password to participate.

You are now required to sign-in using your Yahoo email account in order to provide us with feedback and to submit votes and comments to existing ideas. If you do not have a Yahoo ID or the password to your Yahoo ID, please sign-up for a new account.

If you have a valid Yahoo ID and password, follow these steps if you would like to remove your posts, comments, votes, and/or profile from the Yahoo product feedback forum.

• Vote for an existing idea ( )
• or
• Post a new idea…

• Hot ideas
• Top ideas
• New ideas
• Category
• Status
• My feedback

Improve your services

Your search engine does not find any satisfactory results for searches. It is too weak. Also, the server of bing is often off

I created a yahoo/email account long ago but I lost access to it; can y'all delete all my yahoo/yahoo account except for my newest YaAccount

I want all my lost access yahoo account 'delete'; Requesting supporter for these old account deletion; 'except' my Newest yahoo account this Account don't delete! Because I don't want it interfering my online 'gamble' /games/business/data/ Activity , because the computer/security program might 'scure' my Information and detect theres other account; then secure online activities/ business securing from my suspicion because of my other account existing will make the security program be 'Suspicious' until I'm 'secure'; and if I'm gambling online 'Depositing' then I need those account 'delete' because the insecurity 'Suspicioun' will program the casino game 'Programs' securities' to be 'secure' then it'll be 'unfair' gaming and I'll lose because of the insecurity can be a 'Excuse'. Hope y'all understand my explanation!

I want all my lost access yahoo account 'delete'; Requesting supporter for these old account deletion; 'except' my Newest yahoo account this Account don't delete! Because I don't want it interfering my online 'gamble' /games/business/data/ Activity , because the computer/security program might 'scure' my Information and detect theres other account; then secure online activities/ business securing from my suspicion because of my other account existing will make the security program be 'Suspicious' until I'm 'secure'; and if I'm gambling online 'Depositing' then I need those account 'delete' because the insecurity 'Suspicioun' will program the casino game 'Programs' securities' to be… more

chithidio@Yahoo.com

i dont know what happened but i can not search anything.

Golf handicap tracker, why can't I get to it?

Why do I get redirected on pc and mobile device?

Rahyaftco@yahoo.com

RYAN RAHSAD BELL literally means

Question on a link

In the search for Anaïs Nin, one of the first few links shows a picture of a man. Why? Since Nin is a woman, I can’t figure out why. Can you show some reason for this? Who is he? If you click on the picture a group of pictures of Nin and no mention of that man. Is it an error?

Repair the Yahoo Search App.

Yahoo Search App from the Google Play Store on my Samsung Galaxy S8+ phone stopped working on May 18, 2018.

I went to the Yahoo Troubleshooting page but the article that said to do a certain 8 steps to fix the problem with Yahoo Services not working and how to fix the problem. Of course they didn't work.

I contacted Samsung thru their Samsung Tutor app on my phone. I gave their Technican access to my phone to see if there was a problem with my phone that stopped the Yahoo Search App from working. He went to Yahoo and I signed in so he could try to fix the Yahoo Search App not working. He also used another phone, installed the app from the Google Play Store to see if the app would do any kind of search thru the app. The Yahoo Search App just wasn't working.

I also had At&t try to help me because I have UVERSE for my internet service. My internet was working perfectly. Their Technical Support team member checked the Yahoo Search App and it wouldn't work for him either.

We can go to www.yahoo.com and search for any topic or website. It's just the Yahoo Search App that won't allow anyone to do web searches at all.

I let Google know that the Yahoo Search App installed from their Google Play Store had completely stopped working on May 18, 2018.

I told them that Yahoo has made sure that their Yahoo members can't contact them about anything.

I noticed that right after I accepted the agreement that said Oath had joined with Verizon I started having the problem with the Yahoo Search App.
No matter what I search for or website thru the Yahoo Search App it says the following after I searched for
www.att.com.

WEBPAGE NOT AVAILABLE
This webpage at gttp://r.search.yahoo.com/_ylt=A0geJGq8BbkrgALEMMITE5jylu=X3oDMTEzcTjdWsyBGNvbG8DYmyxBHBvcwMxBHZ0aWQDTkFQUEMwxzEEc2VjA3NylRo=10/Ru=https%3a%2f%2fwww.att.att.com%2f/Rk=2/Es=plkGNRAB61_XKqFjTEN7J8cXA-
could not be loaded because:
net::ERR_CLEARTEXT_NOT_PERMITTED

I tried to search for things like www.homedepot.com. The same thing happened. It would say WEBPAGE NOT AVAILABLE. The only thing that changed were all the upper and lower case letters, numbers and symbols.
Then it would again say
could not be loaded because:
net::ERR_CLEARTEXT_NOT_PERMITTED

This is the same thing that happened when Samsung and At&t tried to do any kind of searches thru the Yahoo Search App.

Yahoo needs to fix the problem with their app.

Yahoo Search App from the Google Play Store on my Samsung Galaxy S8+ phone stopped working on May 18, 2018.

I went to the Yahoo Troubleshooting page but the article that said to do a certain 8 steps to fix the problem with Yahoo Services not working and how to fix the problem. Of course they didn't work.

I contacted Samsung thru their Samsung Tutor app on my phone. I gave their Technican access to my phone to see if there was a problem with my phone that stopped the Yahoo Search App from working. He went to Yahoo and… more

Goldman Sachs Report Says Bitcoin Could Shape 'Future of Finance'

Bitcoin and cryptocurrencies are part of a technology "megatrend" that could change the fundamental mechanics of transactions, according to a new report from Goldman Sachs' equity research analysts.

Bitcoin, along with improved payment security, 'big data' analytics and faster payment networks are the components of a technology trend that will disrupt the payments ecosystem, the report says.

The disruption of the $1.2tn global payments industry will be also be driven by converging trends in regulation, global demographics and the rise of markets outside the United States.

The report says:

"Innovations in network technology and cryptography could change the speed and mechanics of moving money."

Bitcoin will change consumer payments

The report, published yesterday, is titled The Future of Finance: Redefining The Way We Pay in the Next Decade. It's written by James Schneider and SK Prasad Borra, payments analysts at the bank's research division.

It comes as the second in a series that has already featured the rise of 'shadow banks'.

According to Schneider and Borra, bitcoin's major impact will be enabling the transfer of assets without a central clearing authority.

The large public companies that will benefit will be merchants, who will reap savings on payment costs. Firms who might lose out are traditional money-transfer firms like Western Union, Moneygram and Xoom.

The report names Coinbase, BitPay and Ripple Labs as the leading firms in the bitcoin space.

Bitcoin's impact will be felt in the field of consumer-to-consumer payments, the report says. This market includes all payments made between consumers, with examples of leading vendors being mobile wallets like Venmo and Square Cash.

Disruptive entrants to the consumer payments space are limited to earning revenue from international money transfers, according to the report, a market that's worth $580bn. These entrants include bitcoin exchanges and the peer-to-peer platform for foreign currency exchange TransferWise.

Exchanges named in the report include Coinbase, itBit, Circle, Trucoin and CoinCorner.

Bitcoin could also play a significant role in global remittances for customers who want to use cash to begin the transfer process. The report points to Bitspark as an example of a firm that lets customers remit funds by depositing cash, bypassing the need for a bank account. Bitspark then performs the transfer by exchanging it into bitcoin.

New players could take 20% of the current $30bn consumer-to-consumer market from incumbents over the next 10 years, the analysts estimate. Newcomers will also drive fees down from a current average of 6% of the principal to 2.5%.

"Distributed networks are, in principle, more secure and reliable due to their open source nature, and there is no single point of failure," the report notes.

"Given the low transaction fees associated with . virtual currencies, there is potential for significant dislocation in the profit pools associated with money transfer."

Significant merchant interest in bitcoin

The Ripple network is highlighted as a bitcoin alternative that could gain acceptance among small banks. The report points to Ripple's partnerships with banks like Fidor, CBW Bank and Cross River Bank as evidence that the network allows these institutions to perform international money transfers without depending on large banking partners.

Merchant adoption of bitcoin could rise in coming years, the report found. The analysts conducted a survey with the Electronic Transactions Association that found 23% of merchants planned to accept bitcoin within the next 24 months.

The report estimates that more than 100,000 merchants currently take bitcoin payments globally.

The analysts stress that merchant adoption of bitcoin is in its "infancy" and that results so far have been inconclusive. It cites Overstock.com falling well short of its bitcoin sales target last year as an example of a merchant who is not enjoying significant benefits from bitcoin payments.

But the authors also stress that it's too early to write bitcoin off, and that they will "closely monitor" merchant bitcoin-use in the coming months.

The report also noted that nearly 80% of trading volume on bitcoin exchanges is driven by trade in the yuan-bitcoin currency pair, although it did not point out that Chinese exchanges often don't charge fees for trading, leading to higher trading volumes.

The opportunity for bitcoin-link companies is tiny compared to the potential gains available in other sectors identified in the report. While $6bn could accrue to firms like bitcoin exchanges operating in the consumer-to-consumer payments space, some $17bn is up for grabs in the business-to-business payments sector.

In the field of payments between businesses and consumers, $84bn could be taken by newcomers.

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

This Is What Goldman Sachs Is Telling Big Money Clients About Bitcoin

Goldman Sachs Group Inc. is acknowledging that it’s getting harder for institutional investors to ignore the cryptocurrency market with total assets ballooning to $120 billion and bitcoin soaring more than 200 percent this year.

“Whether or not you believe in the merit of investing in cryptocurrencies (you know who you are), real dollars are at work here and warrant watching,” analysts including Robert Boroujerdi and Jessica Binder Graham wrote in a Q&A sent to clients.

The debate has shifted from the legitimacy of the “fiat of the Internet” to how fast new entrants are raising funds, with initial coin offerings and fundraising that now exceeds Internet angel and seed investing. These are some of the questions the Goldman Sachs analysts answered:

How to Trade Cryptocurrencies in the U.S.?

Digital exchanges and block trades, and options will be coming soon. While individual investors can trade virtual coins on various online exchanges, institutional traders have largely stayed out of the cryptocurrency market due to its relatively small size, structure of mandates and volatility. But block trading exists to facilitate the execution of larger orders. In addition, Bitcoin options exist and are traded on offshore exchanges, and could be traded in the U.S. by the end of the year.

Are Cryptocurrencies a Currency or a Commodity?

Coins have attributes of a currency, as they’re presented and trusted by some medium of exchange, and of a commodity, as they’re a limited resource. The classification of cryptocurrencies varies by country, government and even application. In the U.S., the Internal Revenue Service has ruled that virtual currency does not have legal tender status in any jurisdiction. For tax purposes, the IRS treats virtual currency as property.

What is Ethereum?

A platform first, and a cryptocurrency second. Unlike bitcoin, which is designed to be an alternative to “real money,” Ethereum is more of a platform set up to run any decentralized application and automatically execute “smart contracts” when certain conditions are met. Ethereum offers a digital currency called ether, but this is just one component of its smart contract execution and primarily used to facilitate and reward using the network. The rise of ethereum has not come without setbacks, including the $60 million hack of a venture capital-like organization called “The DAO.”

What is an Initial Coin Offering (ICO)?

A fundraiser through token sales. The amount of money funding ICOs has grown exponentially and the speed at which cash is raised with often little more than a white paper and Internet browser has sounded the alarm bells from parties including the Securities and Exchange Commission and the People’s Bank of China. According to Coin Schedule, ICOs have raised $1.25 billion this year, outpacing global angel and seed stage Internet venture capital funding in recent months.

What the Goldman strategists didn’t address is whether institutional investors should be buying cryptocurrencies or not.

Goldman Sachs: Bitcoin Is Not A Currency

Goldman Sachs thinks that Bitcoin believers need to take a cold shower, drink some coffee, and sober up.

In the wake of Mt. Gox’s collapse, the supposed outing of Bitcoin’s creator, and some high-profile arrests, the financial services firm has put together an exhaustive survey of “Bitcoin” and “bitcoin” and ultimately finds the technology promising but the currency wanting.

The key takeaway: Bitcoin likely can’t work as a currency, but … the ledger-based technology that underlies it could hold promise.

For those still unfamiliar with the concept Bitcoin is a peer-to-peer network that allows for the proof and transfer of ownership without the need of a trusted third party, the Goldman Sachs report explains. The unit of the network is bitcoin.

Goldman Sachs’ analysts consider bitcoin — the unit of exchange — more like a commodity than a currency, according to the report.

“We would argue that Bitcoin, and other digital currencies, lie somewhere on the boundary between currency, commodity and financial asset,” write Dominic Wilson, chief markets economist at Goldman Sachs, and Jose Ursua, a global economist with the firm. “Our best definition would be that it is currently a speculative financial asset that can be used as a medium of exchange.”

A successful cyber-currency needs a fixed exchange rate to succeed, according to the economists, and the difficulties Bitcoin faces as a store of value are significant obstacle to its adoption.

“On net, more than taking off as a widely-used alternative currency, it is much more plausible that Bitcoin eventually has a significant impact in terms of its innovation on payments technology, by forcing existing players to adapt or coopt it,” the authors write.

If Bitcoin is, in fact, a commodity, Goldman’s head of commodities research, Jeff Currie, argues that it still won’t hold a candle to the gold-standard of commodities — gold.

“A commodity is any item that ‘accomodates’ our physical wants and needs. And one of these physical wants is the need for a store of value,” writes Currie. Currencies, by contrast, are instruments that are secured by either a commodity or a government’s ability to tax and defend.

By Currie’s reasoning, commodities become supplanted when a better commodity comes along, so, for him, the question is whether Bitcoin solves an economic problem that currently exists with gold.

“The short answer is no,” Currie writes. “Gold is not failing as a store of value as wood failed as a sources of energy in steam engines. Steam locomotives could go farther and faster on coal. But Bitcoin does not improve upon gold.”

Despite Goldman’s bearishness on the currency, the financial services firm does see promise in the technology platform itself, and other firms like the commodities trader Global Advisers are already actively trading Bitcoin directly on a proprietary basis.

Global Advisers’ founding co-principal Daniel Masters likens Bitcoin’s tumultuous trading to the spike in silver prices from 2005 to 2011.

“In my view there is voracious demand for new Bitcoin, and, similar to silver, prices will have to rise dramatically to meet it. Specifically I think the call on Bitcoin could very reasonably be $150 billion, which places it, ironically, in the same ballpark as the valuation of Amazon and of Greece’s M1 money supply,” Masters said.

Entrepreneurs and investors still see promise in the currency (or commodity) and the technology. As we’ve written previously, a new wave of startups are already launching services around Bitcoin and bitcoin that could provide the stability that the industry needs.

“We are seeing the amateur enthusiasts get weaned out and winnowed out,” said Jeremy Allaire, a serial entrepreneur and the founder of Circle — a Bitcoin startup backed by Accel and General Catalyst.

“Bitcoin has achieved real network effects on a global basis,” said Allaire. “The number of new projects and entities and companies being formed on a worldwide basis are legion… there are thousands of them.”

The critical component that’s missing for the adoption and use of Bitcoin is regulation, according to Allaire. “Ultimately what’s going to be necessary is common supervision. There need to be common rules for how digital currency exchanges, wallet services, etc. operate that are consistent around the world.”

Allaire also said that financial institutions like Goldman Sachs are going to have to step up. “All of the very top firms are very interested in the U.S. based trading exchange space,” Allaire said.

Goldman Sachs maintains that it does not yet have an institutional perspective on Bitcoin, but that several initiatives are underway to get a handle on the phenomenon.