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(Kitco News) – Is This the End of the Gold and Bitcoin Debate?
Recently, there has been a mass capitulation in the crypto sector, with some hedge funds shutting down, brokers halting withdrawals, and some other serious issues emerging. Prior to the recent price drop, there were several research notes addressing the case of offering bitcoin as a safe haven asset for gold. We really don’t hear much about it anymore. Gold has serious uses in business. Central banks use gold, and many investment banks and hedge funds invest gold in their portfolios and vaults. Of course, some also use crypto.
In February 2009, analysts at US investment bank JPMorgan believed that capital inflows into Bitcoin could exceed private sector investments in gold, which are estimated at $2.7 trillion. It may still be long-term, but for now it seems like it’s going too far. In defense of the report, analysts said they believe Bitcoin’s volatility must subside and once the asset becomes significantly less volatile, it could appreciate in value.
Earlier this year, another US investment bank, Goldman Sachs, predicted that the price of Bitcoin could reach $100,000. The global investment bank believes Bitcoin Gold will continue to take market share as cryptocurrency adoption increases. “Bitcoin can have uses beyond just a ‘store of value’ – and the market for digital assets is much larger than Bitcoin,” said Zach Pundle, co-head of global forex strategy. He added, “We believe that comparing its market cap to gold can help parameterize the potential outcomes for Bitcoin returns.”
Both offer very different offers. Gold appears to be a store of value and a safe haven. While Bitcoin may have large-scale applications in the future and is currently rather speculative. Gold’s stability proved invaluable at a time when Russia was invading Ukraine and inflation was rampant. While bitcoin capitulated and some even thought that the falling ruble could help halt the cryptocurrency’s passage, the tide appeared to be in the yellow metal’s favour.
The chart below shows the difference in performance between the two asset classes in 2022. Gold is currently flat, but Bitcoin is currently trading down -59%. There is some correlation in the way the two assets move, but when push comes to shove, Bitcoin’s pitfalls are highly volatile. As a store of value and safe haven, gold is undoubtedly the clear winner right now. If you’re looking for high beta games, Bitcoin might be your answer, but there’s no competition for stability.
Disclaimer: The views expressed in this article are those of the author and may not reflect those views Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; However, neither Kitco Metals Inc. nor the author can guarantee this accuracy. This article is for informational purposes only. It is not an invitation to exchange goods, securities or other financial instruments. Kitco Metals Inc. and the author of this article shall not be held liable for any damages and/or damages resulting from the use of this publication.
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