With the usually reticent US Securities and Exchange Commissioner Gary Gensler finally affirming during a recent interview that bitcoin is a commodity and with more investors reconsidering whether the world’s leading cryptocurrency can, indeed, be used as a hedge against inflation, many can’t help but ask an age-old question: is bitcoin the new gold?
What do proponents have to say about their similarities? Why do naysayers scoff at the comparison?
In this article, we weigh in on the arguments coming from both sides of the fence and also give our take on the matter. So, let’s dive in!
- Due to the fact that bitcoin is scarce, can be mined and is considered by many a store of value, some financial experts and analysts refer to it as “digital gold”
- Skeptics, on the other hand, argue that - unlike gold - bitcoin has no actual use. Therefore, to them, the case for bitcoin being heralded as the “new gold” is completely misguided and is a lost cause.
- The focus should be on whether bitcoin can be used as an investment tool for generating cash flow. Cake DeFi offers decentralized finance (DeFi) services that allows investors to generate returns from bitcoin and other cryptos.
BITCOIN IS THE NEW GOLD
Goldman Sachs (New York City-Based Multinational Investment Bank)
Goldman Sachs analyst Zach Pandl wrote in a research note to clients earlier this year that bitcoin is set to claim a market share from gold as digital assets become more widely adopted. In fact, in a hypothetical scenario in which bitcoin grabs a 50% share of this market, he predicted that the price of bitcoin would reach over $100,000.
He also wrote that "Bitcoin may have applications beyond simply a "store of value" - and digital asset markets are much bigger than bitcoin - but we think that comparing its market capitalization to gold can help put parameters on plausible outcomes for bitcoin returns."
Raoul Pal (Global Macro Investor | CEO & Co-Founder of Real Vision Group)
In an interview, Raoul shared that, “We’ve all bought and sold gold, and it’s a pain. You don’t physically own it but if you do, you store it in your house. And it’s clunky and big. And it’s not easy to make payment for a coffee or a car. I mean, I can do it but it’s not easy: we have to agree on the price of gold and all of this stuff. The Internet connects everybody around the world. Everybody’s got a mobile phone. We need money and a store of value that operates in that system. And along comes bitcoin and solves that (problem).”
Ray Dalio (Billionaire Investor | Chief Investment Officer of Bridgewater Associates)
In 2021, Ray revealed that “I own a very small amount of bitcoin. I’m not a big owner. There are certain assets that you want to own to diversify the portfolio, and bitcoin is something like a digital gold.” He also said during a separate interview that “Personally, I’d rather have bitcoin than a bond” in an inflationary scenario.
The following year, he said during an interview that “I think a digital gold, which would be a bitcoin type of thing, is something that -- probably in the interest of diversification or finding an alternative to gold -- has a little spot relative to gold and then relative to other assets,” he said.
BITCOIN IS NOT THE NEW GOLD
Peter Schiff (Economist | CEO and chief global strategist of Euro Pacific Capital Inc., )
During a debate in 2021, former US politician and Founder of Global Investment Firm Skybridge, Anthony Scaramucci said that “I think this cryptocurrency revolution — and bitcoin specifically, because of its scarcity — is going to transcend gold. It’s more portable; it’s impregnable in terms of the transaction over the blockchain; [...] and it’s being adopted quite rapidly.”
In response, Peter said that “In reality, bitcoin and gold have absolutely nothing in common”. He argued that although bitcoin is marketed as similar or equal to gold, it doesn’t possess any of the metallic properties that give gold value.
He also argued that there is a difference between “price and value” -- and that gold’s value is determined by real-world use cases, while bitcoin doesn’t have tangible backing in the real world.
Robert Kiyosaki (Real Estate Investor and Author)
In one of the episodes of his podcast, the “Rich Dad Poor Dad” author revealed that "I trade bitcoin. But I don't think it has any value. I just play the game."
In other episodes, he said that “The US dollar is fake as hell. That's why I own gold and silver. I'd rather have something tangible, I'd rather have oil, I'd rather have fertilizer, because they do something" and that “There's nobody else behind the gold coin. There's no Wizard of Oz, no smoke and mirrors."
Other Experts & Analysts
With the sell-off in cryptocurrencies over the past several weeks, business columnist and author James Surowiecki wrote that “This particular crash is distinctive and distinctively important, because it’s happening at a moment of high inflation, a moment that was supposedly tailor-made for crypto, and bitcoin in particular, to shine relative to other investments. Instead, the value of bitcoin has plummeted, puncturing the myth that it’s what many have called “digital gold.”
Similarly, a recently published article by CNBC pointed out that “Geopolitical tensions and climbing inflation are among the key factors weighing down on bitcoin’s price” -- which “led analysts to question whether its status as a form of “digital gold” still rings true.”
The comparison between bitcoin and gold is, indeed, nothing new. In fact, other financial experts and analysts even compare how they are outperforming each other -- which begs the question: what’s the point?
Will the comparison help you make better investment decisions? How would it affect your investment portfolio? In short, what are your objectives?
For many of us, investing is simply about acquiring purchasing power. Which is why, at the end of the day, it shouldn’t matter whether you agree or disagree that bitcoin is the new gold. The question should always be: can I legitimately make money from it? If yes, then how?
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