“Ether Beats Bitcoin As A Store Of Value,” Says Goldman Sachs Report

The banking giant actually likes Ethereum’s uncapped supply more than Bitcoin’s limited supply, which it says incentivizes hoarding and creates financial bubbles.


Banks have been increasingly venturing deeper into the cryptocurrency market. BNY Mellon, JPMorgan, Morgan Stanley, Saxo Markets, Wells Fargo, and others have already started to or are in the process of offering crypto services.

Goldman Sachs has also rebooted its bitcoin trading desk and is now releasing reports for its clients.

As we reported, the banking giant released a comprehensive report last week covering Bitcoin, Ether, and crypto in general.

In its Global Macro Research, Goldman has declared that “Ether beats bitcoin as a store of value.”

According to this section of the report, Ether (ETH) has a “high chance” of overtaking the leading cryptocurrency as the dominant digital store of value.

Limited supply, which is Bitcoin’s major argument for being an SoV, according to Goldman, is not really important as it is demand and not scarcity that drives the success of a store of value. They point to gold which remains an accepted SoV without having a fixed supply.

“In fact, a fixed and limited supply risks driving up price volatility by incentivizing hoarding and forcing new buyers to outbid existing holders, potentially creating financial bubbles.”

Goldman is rather more interested in Ethereum’s uncapped supply. Ethereum is actually all set to reduce its supply with EIP-1559 that burns fees paid in ETH.

“More important than having a limited supply to preserve value is having a low risk of dramatic and unpredictable increases in new supply. And ether, for which the total supply is not capped, but annual supply growth is, meets this criterion.”

First-mover advantage Not Enough

Ethereum’s superiority is further based on the fact that its ecosystem supports smart contracts and provides developers a way to create new applications on its platform. Most decentralized finance (DeFi) applications are actually being built on the Ethereum network, and most of the non-fungible tokens (NFTs) are purchased using ether, it notes.

“Ethereum can also be used to store almost any information securely and privately on a decentralized ledger. And this information can be tokenized and traded. This means that the Ethereum platform has the potential to become a large market for trusted information.”

All that is happening with the sale of digital art and collectibles online through the use of NFTs is just a “tiny” peak at its actual practical uses, as per Goldman.

With the benefit of running on a decentralized global server base instead of a centralized one like Amazon, Ethereum can also help in providing a solution to concerns about sharing personal data, it added.

And while Bitcoin (BTC) has a first-mover advantage, the report points out that history has shown maintaining that advantage is difficult in an industry with fast-changing technology and growing demand. They lose their dominant position if the incumbent fails to adjust to shifting consumer preferences or competitors' technological advances.

In the crypto market, during 2017/18, Ethereum gained an active user base that was 80% of bitcoin’s size within one year. Not only that, but Ethereum’s governance structure, with a central developer team, drives new proposals, which fits better in today's dynamic environment, but it is currently transitioning from a Proof of Work (PoW) to a Proof of Stake (PoS) to “dramatically increasing the energy efficiency of the system,” it said.

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