Goldman Sachs Assures Recent Bitcoin Surge Poses No Threat To Gold
2020 has been a good year for the crypto space, from the entry of institutional money to the recent surge in Bitcoin which beats the previous all-time high of 2017. When Bitcoin was created in 2012, not many would have believed that in eight more years, it could worth as much as this.
Even though there are still arguments on whether the digital asset could ever be considered an official store of value, the institutional investors are certainly more interested in the crypto more than ever. The use of Bitcoin as a diversifier of assets could be opening more exploration of the cryptocurrency following the outflow from gold to other investments like crypto.
Goldman Sachs believes Bitcoin and gold can coexist
The investment bank, Goldman Sachs, assures that the two valuable store of values could coexist without hurting each other. The bank shared some reassuring information to its investors and was sure that Bitcoin could not ‘cannibalize’ the gold bull’s market. The financial institution explained that it doesn’t see any evidence of Bitcoin’s rally swallowing up gold’s market, even with its recent surge.
The bank, however, noted an underperformance on the part of gold might make investors think Bitcoin is now the new inflation hedge. Although Goldman understood that Bitcoin was taking some market from gold, it doesn’t see Bitcoin’s newly found popularity as a threat to gold’s existence as the currency of last resort.
On Bitcoin’s recent surge, that has won the digital asset a pool of new investors willing to put their Monet into it. Some sources claim that Christopher Wood, head of strategy at Jeffries Financial, invested in Bitcoin to the detriment of gold, following the performance of cryptocurrency in recent times. An Indian News report shared this, though not confirmed, if it’s true, then this is the first time the head of strategy was reducing his gold exposure given his strong preference for the yellow metal.
How gold’s underperformance led to Christopher Wood’s decision
Wood explained that his new Bitcoin’s holding would be around 5% of his total net worth. He has a 50% of his portfolio in physical gold but reported that his gold exposure would be reduced by giving Bitcoin some part in his portfolio. He announced that if Bitcoin drops to below the $20,000 range, he would be able to increase his position with the lower price.
Following a similar stance with Goldman Sachs concerning the importance of gold, he argued that his new investment choice doesn’t mean GREED & fear is giving up on gold. Wood opined that if the Fed tries to maintain a better stance for gold amidst the pandemic recovery, it could help the metal.
With Bitcoin trading between $22,000-$23,000 after the massive surge, gold was dragging in underperformance as the price drops further. Notwithstanding, gold remains a superior asset in central banks due to its acceptance through time, and most people prefer the yellow metal due to its stability. The stability in gold prices might be a major reason some investors have most of their assets in gold to prevent an unexpected loss of funds.