Bitcoin has been questioned for a very long time because of its unpredictability and speculative tendency.
Goldman Sachs, one of the largest financial institutions in the world, shares similar reservations, which appear to have been validated by recent developments in the crypto field.
Goldman Sachs forecasts in a research paper published on Monday that the yellow metal, with its actual demand fundamentals, will outshine the volatile cryptocurrency over the long haul, Reuters reported.
Gold is less likely to be affected by economic circumstances, making it a “good portfolio diversifier,” according to the lender. This is particularly true considering that gold has demonstrated non-speculative use applications while bitcoin is still searching for this type of validation.
Bitcoin Vs. Gold: On Practicality And Value
In the research document comparing the advantages of both assets in a diverse portfolio, the New York-based bank noted that Bitcoin’s unique selling point is built on the cryptocurrency’s potential worth and practicality. Therefore, its future adoption rate is more vulnerable to fluctuations in interest rates than gold’s is.
In 2020, Grayscale – the biggest crypto asset manager, rolled out its very first televised marketing campaign, urging clients to ditch gold and just go for of Bitcoin. The ad program, which depicted the precious metal as cumbersome and antiquated, caused many in the industry to be upset, including crypto detractor and stock broker Peter Schiff.
When the U.S. Federal Reserve started raising interest rates, the largest cryptocurrency was performing similarly to other risky assets despite being consistently promoted as the digital equivalent of gold and a hedge against inflation.
BTC total market cap at $342 billion on the daily chart | Chart: TradingView.com
Bitcoin (BTC) Flexes Its Muscles
As of this writing, BTC is trading at $17,847, up 4.5% in the last seven days, data from Coingecko shows. Bitcoin has been down 75% since hitting an all-time high of $68,790.
Goldman Sachs stated that while net speculative holdings in Bitcoin and gold decreased substantially over the last 12 months, gold is modestly higher year-over-year compared to bitcoin’s 75% decline.
Meanwhile, the bank stated that stringent financial circumstances will hinder the cryptocurrency’s consumer acceptance, which makes a recurrence of the cryptocurrency’s spectacular gains over the last 10 years less likely.
The bank stated that volatility will likely remain elevated until new use cases are identified.
This statement from Goldman Sachs came two weeks after the bank was reported to be carrying out thorough background checks on a handful of crypto companies.
After the downfall of FTX, which inflicted a severe blow to several crypto-related companies, Goldman Sachs is seeking to acquire organizations that are “more reasonably priced.”