- Goldman Sachs’ exec believes that gold is fast losing its top position as the best asset against inflation.
- He said cryptocurrencies like Bitcoin are taking away the shine from the asset.
- Inflation in the US has reached frenetic levels after the inflation report was released last week.
Gold, the precious metal that has served as the foundation of the world’s monetary system for thousands of years, is under pressure. Bitcoin and other cryptocurrencies are flipping the asset in recent months, changing the balance as we know.
Gold – The Poor Man’s Crypto
Damian Courvalin, Head of Energy Research at Goldman Sachs has warned that gold is losing its crown to Bitcoin as the leading asset for a hedge against inflation. The Goldman Sachs exec stated this at an interview with Bloomberg where he laid bare his mind on the correlation between both asset classes.
According to the expert, a few years ago, it was easy to say that Bitcoin and Gold could co-exist in harmony without the need to “cannibalize each other” but in recent months a seismic shift has occurred. He cites the recent inflation signal as a valid reason for the rise of cryptocurrencies against gold as a suitable hedge against inflation.
“Just like we argue that silver is the poor man’s gold, gold is maybe becoming the poor man’s crypto,” Courvalin said. “The value of crypto is its network, just like the value of oil is the fact that it’s consumed. Gold, like diamonds and art, doesn’t have that. It’s just a pure defensive asset that can outperform over a significant period of time.”
Despite his statement, Courvalin noted the trend of several investors skirting the two asset classes. For example, Chinese investors turned to gold in the wake of the nationwide cryptocurrency crackdown by authorities while US investors splurged on Bitcoin as inflation came to a 30-year high.
Gold becoming the poor man’s crypto can be seen in the number of outflows from gold into cryptocurrency markets. A recent report by JPMorgan indicates that $10 billion has flowed out of gold ETFs and $20 billion has entered into Bitcoin funds and the trend shows no signs of slowing down.
Bitcoin is Digital Gold
Bitcoin has continued its fine form in recent months and briefly surpassed the entire market capitalization of silver when it reached a peak of $68K last week. Enthusiasts were jubilant when Grayscale Investments released its updated holdings that showed that the value of its digital holdings have surpassed $60 billion. The new figure sees it surpass the largest gold fund in the world, the SPDR fund that has only $59.26 billion worth of assets.
The rising inflow in Bitcoin ETFs in the US in less than a month after they began operations is a testament that new order is taking shape. Barry Sternlicht, a serial investor stated in a recent interview that “gold was kind of worthless” while Michael Saylor has revealed that Bitcoin is a more superior store of value than gold.
The entire cryptocurrency market capitalization nears $3 trillion while gold’s market capitalization is at $11.8 trillion.
