According to Bloomberg, Goldman Sachs analysts believe that gold is preferable to cryptocurrency. When evaluating the key characteristics and taking into account that fear and liquidity are the main driving forces that stimulate investment in gold, it becomes a better option than Bitcoin.
Goldman Sachs analysts Jeffrey Kerry and Michael Hinds wrote in a report:
“Precious metals remain a relevant asset class in modern portfolios, despite their lack of yield. They are neither a historic accident nor a relic. Looking at properties such as durability and intrinsic value, they are still relevant even with new materials discovered and new assets emerging, such as cryptocurrencies.”
Investors increase the volume of gold in their portfolios amid growing uncertainty, Goldman Sachs reports. Wealth is a long-term driver, especially in emerging markets such as China, where revenue growth over the next few decades will support prices, the report adds.
This year, Bitcoin demonstrated phenomenal profitability, soaring to $6000 from $1000 at the beginning of the year. Elsewhere, gold grew by 12%. For comparison, the bank showed a few characteristics that determine the quality of investments, adding that it focuses on currency, and not on blockchain technology behind them:
- Durability: despite the fact that both require expertise for proper long-term storage, gold wins, because cryptocurrencies are vulnerable to cyrberattacks.
- Portability: gold transfers can be costly, given their weight, the need for a high level of safety and high import taxes in countries like India. On the contrary, Bitcoin is much faster and cheaper to move.
- Intrinsic value: gold has a limited supply while it is easy to create alternative cryptocoins. The latter have no intrinsic value.
- Unit of account: gold maintains purchasing power better and has much lower daily volatility.
It is also worth noting that large players are scared of investing in cryptocurrencies because of their sharp growth. For example, one of the most successful cryptocurrency traders, Michael Novogratz, who predicted their rapid growth several years ago, stated that cryptocurrencies are the biggest bubble in his life. At the same time, he noted that the second most popular coin, Ethereum, has already reached its maximum.
Novogratts is confident that the crypocurrencies represent a colossal bubble, but their price will soar very high, and this needs to be exploited.