Why the yellow metal will outperform crypto, according to Goldman Sachs
Bitcoin has been questioned for a very long time due to its unpredictability and speculative tendency.
Goldman Sachs, one of the largest financial institutions in the world, shares similar reservations, which seem to have been confirmed by the latest developments in the crypto field.
Goldman Sachs predicts in a research paper published on Monday that the yellow metal, with its actual demand base, will outperform the volatile cryptocurrency in the long term, Reuters reported.
Gold is less likely to be affected by economic circumstances, making it a “good portfolio diversifier,” according to the lender. This is especially true considering that gold has demonstrated non-speculative utility applications while bitcoin is still searching for this type of validation.
Bitcoin vs. Gold: about practicality and value
In the research paper comparing the merits of both assets in a diverse portfolio, the New York-based bank noted that Bitcoin’s unique selling point is built on the cryptocurrency’s potential value and practicality. Therefore, its future rate of use is more vulnerable to fluctuations in interest rates than gold’s is.
In 2020, Grayscale – the largest crypto asset manager, launched its very first TV marketing campaign, urging customers to ditch gold and just go for Bitcoin. The ad program, which portrayed the precious metal as cumbersome and obsolete, angered many in the industry, including crypto critic and stockbroker Peter Schiff.
As the US Federal Reserve began raising interest rates, the biggest cryptocurrency performed in line with other risky assets despite being consistently promoted as the digital equivalent of gold and a hedge against inflation.
BTC total market cap at $342 billion on the daily chart | Chart: TradingView.com
Bitcoin (BTC) is flexing its muscles
At the time of writing, BTC is trading at $17,847, up 4.5% in the past seven days, data from Coingecko shows. Bitcoin is down 75% since hitting an all-time high of $68,790.
Goldman Sachs stated that while net speculative holdings in Bitcoin and gold fell significantly over the past 12 months, gold is modestly higher year-over-year compared to bitcoin’s 75% decline.
Meanwhile, the bank stated that tight economic conditions will hinder the cryptocurrency’s consumer acceptance, making a repeat of the cryptocurrency’s spectacular gains of the past 10 years less likely.
The bank stated that volatility is likely to remain elevated until new use cases are identified.
This statement by Goldman Sachs came two weeks after the bank was reported to have conducted thorough background checks on a handful of crypto companies.
After the fall of FTX, which dealt a serious blow to several crypto-related companies, Goldman Sachs seeks to buy organizations that are “more affordable.”
