Goldman Sachs Calls Gold the Poor Man's Crypto

Goldman Sachs sees superior value in crypto as inflation fears drive droves of investors into gold and crypto

By
Chung Yee
on
November 15, 2021
Category:
Breaking News

Gold the Poor Man’s Crypto

Damien Courvalin, Head of Energy Research and Senior Commodity Strategist at Goldman Sachs in an interview with Bloomberg last Thursday was bullish on the prospect of gold as inflation rises but sees crypto as having a slight edge over gold as its value is in the network. 

Courvalin admitted that crypto is becoming a form of substitution for gold lately and he says, ‘Just like we argue that silver is the poor man’s gold, gold is maybe becoming the poor man’s crypto.’

Gold has played a vital role as a defensive asset for its scarcity. Gold has been holding the narrative for centuries as the ultimate hedge against inflation. However, this role is slowly eroded by the emergence of crypto. 

Source: Gold has played the role as the ultimate store of value for centuries but crypto is slowly gaining acceptance based on the same narrative

Although the Head of Energy Research in Goldman Sachs seems to think that there can be an allocation for both as inflation becomes a pressing issue, Paul Tudor Jones thinks that crypto is winning the race against gold. 

In an interview with CNBC in October, Billionaire hedge fund manager, Paul Tudor Jones says, ‘Clearly, there’s a place for crypto. Clearly, it’s winning the race against gold at the moment … It would be my preferred one over gold at the moment.’


Store of Value With an Edge

One of the major advantages that crypto has over gold is its utility. This utility exists in various forms and performs various functions. We have seen how blockchain technology infiltrates the financial world through Decentralized Finance (DeFi) and its role in automating processes in a permissionless manner.  

Source: The Lindy Effect, if applied to Bitcoin suggest that the asset will continue to grow with the passage of time

Bitcoin did not fail in its early stages and with the passage of time, its growth will be exponential as it proves itself. Gold today has a market capitalization of $11.816 trillion and the crypto market’s capitalization is only at $3 trillion. This tells us, that crypto adoption is only in its infancy. 

With US’s inflation hitting 6.2%, its highest in three decades, investors are seeking alternative assets to preserve their wealth from a depreciating dollar. Crypto holds this narrative well as both a store of value and as an appreciating asset that is still growing exponentially. 

Source: Dollar is depreciating as inflation soars, therefore the quest to find a safe store of value is picking up pace

Changing Perception 

The public’s perception of crypto is fast changing. With the increased rate of adoption by institutions and laws to legalize trading and exchange of crypto assets, more economic activities are built around crypto assets. Damien Courvalin is right to suggest that soon, gold may play the second fiddle to crypto, exactly like how silver is viewed as the second-best alternative to gold.

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Chung Yee

Chung Yee has a legal background and has been involved in research works for the legal and compliance industry. Writing is his passion, centered on topics such as the blockchain and finance.