Goldman Sachs said that when it comes to being assessed on the majority of the key characteristics of money, there’s no competition — gold wins out over cryptocurrencies.
“Precious metals remain a relevant asset class in modern portfolios, despite their lack of yield,” analysts including Jeffrey Currie and Michael Hinds wrote. “They are neither a historic accident or a relic.” Looking at properties such as durability and intrinsic value, precious metals are still relevant even with new materials being discovered and new assets emerging, such as bitcoin and other blockchain-based cryptocurrencies, they said.
According to news from Bloomberg, the report listed several characteristics comparing gold and bitcoin, focusing on the currency, not the blockchain technology.
The report noted that when it comes to durability, gold wins, because cryptocurrencies are vulnerable to hacking, are subject to regulatory, network and infrastructure risk during a crisis. In terms of intrinsic value, there’s a limited supply of gold and other precious metals in the Earth’s crust, whereas in the case of cryptocurrencies, it’s easy to create alternatives through initial coin offerings (ICOs).
In addition, gold is better at holding its purchasing power and has a much lower daily volatility, while bitcoin/dollar volatility has averaged almost seven times that of gold in 2017, the bank said.
Goldman Sachs isn’t the first bank to question the future of bitcoin. JP Morgan’s CEO Jamie Dimon said during an investor conference in New York last month that bitcoin “is a fraud,” predicting that the cryptocurrency would soon implode.
“The currency isn’t going to work,” the executive said. “You can’t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart.”