Bitcoin’s rising price and popularity are not threatening gold’s status as the go-to safe haven according to strategists from Goldman Sachs. Their stance seemingly clashes with that of JPMorgan strategists, who believe BTC has the potential to compete with gold in the long run.
According to Business Insider, Goldman Sachs strategists led by Jeffrey Currie, conceded gold’s recent underperformance versus the U.S. dollar and real rates left “some investors concerned that bitcoin is replacing gold as the inflation hedge of choice,” but added:
While there is some substitution occurring, we do not see bitcoin’s rising popularity as an existential threat to gold’s status as the currency of last resort.
The price of bitcoin, it’s worth noting, moved up over 240% year-to-date, partly thanks to investments from institutional investors like Paul Tudor Jones, who believe investing in the flagship cryptocurrency is a defensive move, taking into account the U.S. Dollar Index’s (DXY’s) recent performance caused by unprecedented monetary policy.
Goldman Sachs’ strategists added that institutional investors and wealthy individuals avoid investing in cryptocurrencies because of “transparency issues,” but noted retail investors speculating on the market cause bitcoin “to act as an excessively risky asset.”
To Goldman, bitcoin is the “retail reflation trade,” while gold is a “defensive asset with long-term real capital preservation.” The bank’s strategists noted the recent decline in the price of gold is related to an investment strategy based on COVID-19 vaccines which led investors to riskier assets.
They added:
We do not see evidence that bitcoin’s rally is cannibalizing gold’s bull market and believe the two can coexist.
Notably, quantitative strategists at JPMorgan including Nikolaos Panigirtzoglou have earlier this month revealed that institutional adoption of bitcoin has “only begun” while that of gold is “very advanced,” which could BTC may take over some of gold’s market capitalization.
In a note, JPMorgan said that their calculation suggests that BTC accounts for 0.18% of family office assets, while gold ETFs account for 3.3%. Investors could tilt the needle for BTC over gold by buying one unit of GBTC and selling three units of the SPDR Gold Trust, they said.
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