Posted on Leave a comment

Bitcoin’s Run Won’t Harm Gold: Goldman Sachs Disagrees With JPM

With bitcoin climbing to new all-time highs, the cryptocurrency has garnered the attention of centralized financial institutions. Goldman Sachs Group Inc. offered its views on the market and said that BTC’s rise shouldn’t threaten gold’s position as the inflation hedge of choice as both assets can coexist.

Bitcoin And Gold Can Coexist

Ever since bitcoin’s creation, the primary cryptocurrency has been largely compared to the yellow metal due to some of the common attributes, such as the limited supply.

However, while this narrative was primarily breached by BTC proponents in the past, the comparison has seen adoption from numerous traditional financial organizations in 2020.

And while various institutions have claimed that bitcoin has become gold 2.0 and could take its place, Goldman Sachs argued that both assets could work simultaneously.

Cited by Bloomberg, the New York City-headquartered American multinational investment bank disputed the claim that BTC’s recent bull run and a new all-time high will harm the precious metal. However, Goldman admitted that there’s an ongoing substitution of funds.

“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. 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 bank, which has openly doubted BTC’s merits in the past, added that wealthy investors still tend to avoid the cryptocurrency due to “transparency issues.” At the same time, “speculative retail investment causes Bitcoin to act as an excessively risky asset.”

JPMorgan Disagrees

Another Wall Street banking giant, JPMorgan Chase & Co, recently provided an entirely different opinion on the situation with gold and bitcoin.

The bank’s report highlighted a wealth transfer from gold ETFs to the cryptocurrency and asserted that the yellow metal will suffer.

JPM argued that the adoption of bitcoin by institutional investors has just begun, with the recent examples from the likes of Paul Tudor Jones III and hedge funds such as One River Asset Management.

In contrast, gold’s adoption by institutions is already “very advanced,” and if the trend continues in the coming years, “the price of gold would suffer from a structural headwind.”

Featured Image Courtesy of Bloomberg

Leave a Reply