By George Ward
The Wall Street investment banking behemoth Goldman Sachs recently disclosed that it expects Bitcoin to lag behind gold as a long-term investment product due to its demand drivers. In addition, the firm added that more stringent regulations in the future would likely impact cryptocurrency.
Gold Over BTC
According to a research paper published by the investment bank, the banking behemoth sees gold as a crucial tool for diversifying investment portfolios. In addition, the paper noted that, unlike Bitcoin, gold is a non-speculative asset with real-time use cases, while the largest crypto token is still looking for one.
In a report by Reuters citing Goldman Sachs’ analysts, they stated that while traders use gold to hedge against inflation and USD debasement, BTC is a high-risk growth asset resembling a tech-firm stock.
The investment bank described crypto as a solution in search of a problem whose value is measured in its actual expected use cases in the future. However, the firm added that cryptocurrency is now more volatile and speculative than gold, which is regarded as the king of precious metals.
According to the bank, investors’ interest in exploring decentralized digital assets may steadily decline as the financial market becomes stricter with regulations.
Reacting to the bankruptcy proceedings involving Three Arrows Capital (3AC), Celsius, BlockFi, and FTX. Goldman Sachs states, “Bitcoin’s instability is a weakness further heightened by the systemic concerns in the broader crypto market as several top crypto players filed for bankruptcy protection over the past few weeks.”
The bank maintained that the net speculative standings for gold and Bitcoin had significantly declined over the past year. Still, gold has witnessed increased value in the past year, while Bitcoin has plummeted by over 80%.
However, the bank noted that tighter liquidity would have a slight drag on gold, which tends to have high exposure to fundamental demand forces. These demand drivers for gold include central banks’ monetary policies, consumer buying, and industrial requests.
Investors Show Confidence In BTC
Despite Goldman Sachs’s report on gold’s use cases over Bitcoin, some investors are still hopeful of the crypto asset’s prospects.
Early in December, the founder of Draper Associates, Tim Draper, reiterated his $250,000 price prediction for Bitcoin. In addition, the billionaire stated that the value of the flagship digital currency would hit the mark by next June.
Echoing a similar sentiment to Draper, Mike Novogratz believes that Bitcoin will reach $500,000 per coin in the future. He, however, halts his prediction following the Federal Reserve and central banks’ decision to raise interest rates to battle inflation.
According to Novogratz, for BTC to trade at his predicted price, the Fed under Jerome Powell and his central bank counterparts should not drive another rate increase.
Even though BTC is seen as a likely alternative to the already established fiat system, many traditional financial institutions still need to be convinced despite acknowledging the disruption caused by cryptocurrency.
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