Wall Street giant Goldman Sachs has revealed that it expects gold to outperform flagship cryptocurrency Bitcoin ($BTC) over the long-term over its demand drivers, while expecting the cryptocurrency to be more impacted by tighter financial conditions.
In a research note, the bank wrote that gold is a “useful portfolio diversifier” as it has developed non-speculative use cases, while it believes $BTC is still looking for one. Analysts at Goldman showed that while traders are using gold as a hedge against inflation and dollar depreciation, BTC resembles a “risky stock of a high-growth tech company,” according to Reuters.
According to the bank, cryptocurrency is a “solution that seeks a problem” whose value proposition is derived from its future real-world use cases. At the moment it is more volatile and speculative than the precious metal.
The bank predicts that investors’ willingness to explore decentralized digital currencies may wane as financial conditions tighten. Referring to hedge fund Three Arrows Capital, lenders BlockFi and Celsius, and FTX, the bank wrote:
Bitcoin’s downside volatility was also compounded by systemic concerns as several large companies filed for bankruptcy
According to Goldman Sachs, net speculative positions in both gold and bitcoin have fallen significantly over the past year. However, gold has appreciated slightly year-over-year, while bitcoin is down 75%. Tighter liquidity, the bank wrote, should be a “lesser drag on gold, which is more exposed to real demand drivers.” These include consumer shopping in Asia, money demand from central bank money and industrial applications.
BTCUSD chart via TradingView
As CryptoGlobe reported, some investors are still bullish on BTC. Earlier this month, billionaire investor Tim Draper, founder of Draper Associates and one of Silicon Valle’s most prominent investors, doubled his $250,000 price prediction for Bitcoin, saying the cryptocurrency will reach that mark by June next year.
Draper isn’t the only billionaire bullish on crypto. Billionaire investor Mike Novogratz has revealed that he still believes BTC will trade at $500,000 per coin going forward, but has postponed his prediction that the Federal Reserve and other central banks will hike interest rates to curb inflation.
Novogratz said he believes $BTC is trading at $500,000, but “not in five years,” as Federal Reserve Chair Jerome Powell found “his central bank superpowers.”
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