As Bitcoin continues its meteoric rise and surpassed the market capitalization threshold of one trillion dollars in 2021, more and more investors are evaluating the long-standing comparison between the well-known cryptocurrency and the equally well-known asset class: gold.
According to experts, both assets are often perceived as means for portfolio diversification or as protection against inflation of national currencies caused by unsustainable fiscal and monetary policies.
However, until recently, it was rare to see Wall Street analysts, executives, or established investors seriously comparing these two assets. Bitcoin, often referred to as digital gold, has historically been considered a risky speculative investment for those looking to profit in the short term. Gold, on the other hand, has always been regarded as a safe-haven asset.
The rapid rise of Bitcoin in 2021, to over $60,000, supported by new investments from Tesla and other institutional names, has led individuals to question whether the old assumptions about this asset are accurate.
The text highlights some expert opinions:
– “My vote goes for gold because it has thousands of years of historical record as a store of value, has one-fifth the volatility of Bitcoin, and does not face the same risk of competition. The day Queen Elizabeth trades five pounds of gold in her crown for crypto is the day I will change my course,” emphasized David Rosenberg of Rosenberg Research, former chief economist and strategist for Merrill Lynch Canada and Merrill Lynch in New York.
– “Gold and silver have been stores of value and mediums of exchange for at least 4,000 years in every civilization in every corner of the world. They have unparalleled accessibility to people of all economic standings and technological knowledge. Gold is the premier currency of central banks, while silver is the people’s currency. There is room for cryptocurrencies since their digital nature is a fundamental difference from gold and silver. But that characteristic also ensures that cryptocurrencies will never replace gold and silver and will ultimately enhance the value of the metals,” said Phil Baker, President and CEO of Hecla Mining Company.
– “One of the assumptions underlying the rise in Bitcoin’s price is its limited supply, but the supply of cryptocurrencies, as a whole, is theoretically unlimited. Some have hailed Bitcoin as a portfolio diversifier, but so far it has shown greater correlations with stocks than gold, especially during periods of stress in the stock market when diversification tends to add the most value,” explained Michael Reynolds, investment strategy advisor at Glenmede.
