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Bitcoin is “digital copper,” says Goldman Sachs

Photo of: Joseph Stone
by Joseph Stone

More investors are turning to gold as an alternative to Bitcoin, observes Goldman Sachs’ head of commodities.

Gold and Bitcoin are frequently lumped together. BTC is thus referred to as digital gold or gold 2.0. Its growth potential therefore lies in the crypto-asset’s ability to appeal to gold market investors.

Its performance in May, which resulted in a drop of 35%, is however not likely to initiate this trend. The movement would even be the opposite currently if we are to believe the head of commodity research at Goldman Sachs.

On CNBC, Jeff Currie takes the opportunity to dismiss any comparison between gold and Bitcoin as a hedge against inflation. For the executive, BTC is therefore akin to a “risky” asset. And if it were to be compared to a commodity, it would be copper and not gold.

“Digital currencies are not a substitute for gold. They would be an alternative to copper, pro-risk assets. They are a substitute for risk on inflation hedges, not risk-free hedges,” the commodities expert judges.

So could Bitcoin not hope to be an answer to inflation? The answer is complex. For Jeff Currie, there are two types of inflation, “good” and “bad”. Each type has its own hedges.

Bitcoin would be an asset for good inflation, i.e. demand-driven inflation. BTC, but also copper and oil are then hedging assets against this type of inflation. Gold, on the other hand, is the answer to bad inflation, the Goldman Sachs representative continued.

“Gold covers bad inflation, when supply is reduced, which is … focused on shortages of chips, commodities and other types of raw materials,” he points out. No, Jeff Currie is not a Bitcoin supporter.

As far back as April, he was denying the cryptocurrency’s status as digital gold and a store of value. According to him, this status was anything but perennial, since at any time a better crypto could, in its place, grant it.

In any case, when it comes to arbitrage between gold and Bitcoin, institutional investors have already chosen, according to JPMorgan. Already during the crash of May 19, these investors would have bought weakly on the downside.

They would instead choose to turn to gold. “Bitcoin funds continue to see outflows and gold exchange-traded funds are seeing inflows. This suggests that the shift away from bitcoin and back into traditional gold by institutional investors is still underway,” Nikolaos Panigirtzoglou analyzes.