Goldman’s analysis indicates that while traders use gold to hedge against inflation and dollar debasement, Bitcoin (BTC) resembles a ‘risk-on high-growth tech firm stock. Goldman Sachs now expects gold, with its real demand drivers, to outperform the explosively volatile Bitcoin in the long term, the bank wrote in a December 12 research note.
Gold is less likely to get influenced by tighter financial conditions, which means that it is “a useful portfolio diversifier”, mostly given that gold has developed non-speculative use cases while Bitcoin has not yet found one.
Goldman’s analysis indicates that while traders use gold to hedge against inflation and dollar debasement, Bitcoin (BTC) resembles a ‘risk-on high-growth tech firm stock. The value proposition of Bitcoin, which the bank termed as “a solution looking for a problem”, comes from the scope of its future real use cases, making it a highly volatile and speculative asset than the precious yellow metal.
Although the investors’ willingness to explore the decentralized currency helped in Bitcoin adoption, the bank projects financial conditions will become tighter. While citing the collapse of the FTX exchange and the 3AC hedge fund, the bank noted:
Buy Bitcoin Now“Bitcoin’s volatility to the downside was also enhanced by systemic concerns as several large players filed for bankruptcy.”
While net speculative positions in both these assets dropped steeply over the past year, gold is marginally up year-on-year against Bitcoin’s drop by 75%, the bank noted. It stated:
“Tighter liquidity should be a smaller drag on gold, which is more exposed to real demand drivers like Asian consumer buying, central bank monetary demand, safe-haven investments and industrial applications.”
“Moreover, gold may benefit from structurally higher macro volatility and a need to diversify equity exposure.” – Reuters.
