Video: why bitcoin could turn into digital gold
The flurry of excitement over bitcoin and the lackluster performance of gold have begged the question: is the cryptocurrency taking demand from bullion?
The answer is no, according to Goldman Sachs Group Inc. While bitcoin has shown much greater volatility and lower liquidity compared to gold, the $275 billion market value of bitcoin is dwarfed by gold’s $8.3 trillion, analysts including Jeffrey Currie and Michael Hinds wrote in a note dated Dec. 11.
“While the lack of liquidity and increased volatility may keep bitcoin interesting, it’s unlikely to convince investors looking for the kind of diversification and hedging benefits which gold has proven to possess over its long history,” the analysts said.
Bitcoin jumped above $17,000 on Monday after starting the year around $1,000, with the launch of futures on the Cboe Global Markets Inc. exchange on Sunday adding to the frenzy. Gold’s up less than 10 percent in 2017.
They laid out three reasons why investors aren’t substituting bitcoin for gold:
Story by Ranjeetha Pakiam.