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Goldman Sachs Says Bitcoin’s Surge Will Not Threaten Gold’s Status


We are only one week away from the end of what has arguably been a calamitous year, and the question that most traders have been asking themselves is certainly: Bitcoin or gold? As the Bitcoin vs. gold debate continues, some others are predicting gold’s eventual demise due to Bitcoin’s strong growth. According to a report by Goldman Sachs, however, the bank does not believe that gold will suffer at the hands of Bitcoin’s immense growth potential.

Both assets have never been as closely correlated as they are at present given their similar performances in the market in the last 12 months. Bitcoin, the world’s largest cryptocurrency, went from chasing after gold to almost sitting right next to gold as a close-to-equivalent asset, with many coining the moniker ‘digital gold’ for Bitcoin. The orange coin has spent so many years lagging behind gold as an asset, so much so that it is almost surreal to not only see Bitcoin and gold being compared to each other on almost the same level, but also debates on whether the former can surpass the latter.

JPMorgan Chase recently published a report stating that Bitcoin’s growth will likely cannibalize that of gold in the long run, and noted a trend of funds moving out of gold and into Bitcoin instead in the last few months. Similarly, the year’s greatest Bitcoin fanatic Michael Saylor is of the opinion that Bitcoin and gold cannot co-exist. While the eventual outcome for gold as an asset is probably not as severe as Saylor made it out to be, it is a fact that more investors and analysts are veering towards a one-or-the-other situation, with Bitcoin possibly coming out on top.

Goldman Sachs thinks otherwise.

“Gold’s recent underperformance versus real rates and the dollar has left some investors concerned that Bitcoin is replacing gold as the inflation hedge of choice. We do not see Bitcoin’s rising popularity as an existential threat to gold’s status as the currency of last resort,” the research note revealed.

Institutional investors are likely to be more cautious towards Bitcoin due to a lack of transparency, while retail investors are unlikely to put any of their eggs in a risky basket of assets, the bank argued. It remains to be seen if this will hold true, as the rush of institutional investments into Bitcoin and other crypto assets is evidence of otherwise. The DeFi hype during this year’s summer has also proven that retail investors are drawn into assets they believe will generate the most wealth in the shortest period of time.

It will certainly be a while yet before Bitcoin will show even the slightest of signs of its overtaking of gold, but if Bitcoin manages to keep up the momentum it has had in the last three months, that moment may come sooner than expected.

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© Copyright of Novum Global Consultancy Pte Ltd {2020, 2021}. All rights reserved.

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