The hottest debate on Wall Street: buy gold or bitcoin?


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Foreword: Unlike the round of Bitcoin surge in 2017, this time Bitcoin’s surge is no longer just a carnival for retail investors. Many large institutional investors have turned their attention to Bitcoin. In anticipation of high inflation and high debt levels, some analysts believe that Bitcoin may become a safe-haven asset for the next generation.

Recently, with the sharp drop in gold and the surge in Bitcoin, who is the better safe-haven asset? Will Bitcoin replace gold? Is this surge in Bitcoin a recurrence of the speculative market in 2017?

These issues have once again triggered heated discussions on Wall Street.

Will Bitcoin replace gold?

Some investors believe that today, Bitcoin has appeared to replace gold.

Jean-Marc Bonnefous, former commodity hedge fund manager and current digital currency investor, said:

Gold is indeed a safe asset for the world and baby boomers in the past, and now it has been replaced by digital assets such as Bitcoin. At present, many retail investors, speculative professionals and momentum investors have poured into digital currencies such as Bitcoin, but traditional institutional investors have been on the sidelines.

But this situation seems to be changing.

The investment company Guggenheim has joined the Bitcoin investment boom, and the more well-known legendary investors Paul Tudor Jones and Stan Druckenmiller have also begun to participate.

Institutional investors are starting to take Bitcoin seriously

It is worth noting that when Bitcoin rose sharply in 2017, Wall Street did not take this asset seriously. Today, Bitcoin once again rushed to a record high, and more and more Wall Street investors are beginning to take this digital currency asset seriously. .

On Monday, Inigo Fraser-Jenkins, a strategist at Sanford C. Bernstein, wrote:

I changed my mind! Bitcoin will not replace gold, but both have room for upside, especially if the future macro outlook is rising inflation and rising debt levels.

At present, Bitcoin has found loyal supporters among the world’s largest asset management companies, which also proves its growing appeal on Wall Street.

The head of BlackRock, the world’s largest asset management company, recently made a rare positive comment on Bitcoin, believing that Bitcoin may evolve into a global market asset.

BlackRock CEO Larry Fink said in a conversation with former Bank of England Governor Mark Carney on Tuesday local time that although Bitcoin did not attract his own attention, it did attract the attention of Wall Street.

Fink believes that Bitcoin may evolve into a global market asset:

These huge amounts (funds) are moving every day… This is a fragile market. Can it evolve into a global market? maybe.

JPMorgan Chase analysts believe that investors, including family funds, are selling their gold holdings and turning to digital currencies. Since November 6, funds investing in gold and silver have been lightened by about 93 tons, worth about $5 billion. However, the funds flowing into the “Grayscale Bitcoin Trust” fund have doubled since the beginning of August.

Bitcoin can still rise?

Simon Peters, an analyst at eToro, a multi-asset investment platform, believes:

Although the current rapid rise of Bitcoin is indeed similar to 2017, there are some basic differences, which means that Bitcoin may continue to rise further.

First of all, it is not only ordinary investors who buy Bitcoin now. Larger institutional investors such as pension funds and hedge funds are investing in digital currencies, and many see them as a tool to hedge against inflation.

Secondly, Bitcoin continues to be in short supply, and investors hope to hold their Bitcoin for a long time.

For these reasons, Bitcoin may continue to climb this year. If we maintain the current upward trend, then by the end of the year, Bitcoin is expected to stand above $25,000.

According to James Butterfill, an investment strategist at Coin Shares, the market value of Bitcoin is currently only 3.1% of gold. He estimated that if the market value of Bitcoin can reach 5% of gold, it means that the price of Bitcoin will rise to $31,300, while the current price of Bitcoin has not exceeded $20,000.

Butterfill said:

Bitcoin is establishing itself as a reliable anti-inflation asset. This is particularly attractive during an unprecedented period of loose monetary policy. For these reasons, investors will naturally compare it with gold.

Gold falls and Bitcoin rises. Is it true that safe-haven assets have been rotated?

However, the reason for the recent poor performance of gold is not entirely due to investors’ transfer of funds to digital currencies. For example, the recent good news about the new crown vaccine has reduced the market’s demand for safe-haven assets. In addition, Bloomberg believes that in the context of relatively stable market inflation expectations, the decline in gold is only driven by the animal spirit of investors, while Bitcoin has always been affected by speculative enthusiasm.

Nowadays, Bitcoin is becoming more and more attractive to investors, but another factor that makes gold “out of favor” is the transparency of Bitcoin transactions.

Bitcoin transactions are all on the blockchain, and transaction records can be traced at any time. But gold is different. Many young investors believe that the success of gold trading depends more on the mutual trust between people, and is more similar to “black box trading.”