Wall Street titan Goldman Sachs has disclosed that it believes gold will outperform the most popular cryptocurrency, Bitcoin ($BTC), over the long term in terms of its demand drivers. However, Goldman Sachs anticipates that more stringent financial conditions will influence cryptocurrency more.
The bank stated in a research note that gold is a "valuable portfolio diversifier" since it has created non-speculative use cases. However, in their opinion, $BTC is still hunting for one.
The statement was made that Bitcoin is still searching for a use case. According to Reuters (1), analysts from Goldman Sachs demonstrated that although investors buy gold as a hedge against inflation and dollar debasement, bitcoin is more similar to the stock of a "risk-on high-growth software business."
The bank believes that cryptocurrency is a "solution looking for a problem" and that its value proposition originates from its potential future applications in the real world. At this point, it exhibits higher volatility and speculation than the precious metal.
Interest in Bitcoin will Decline as Monitory Policy Tightens
The bank has a prediction that as monetary policy becomes more restrictive, the inclination of investors to investigate decentralized digital currencies may decrease. The bank responded in an email that it referred to the hedge firm Three Arrows Capital and the lenders BlockFi, Celsius, and FTX.
The systemic worries that arose due to numerous significant players declaring bankruptcy also contributed to Bitcoin's increased volatility to the downside.
According to Goldman Sachs, the amount of net speculative holdings held in gold and bitcoin have considerably decreased over the past year. However, gold's value has seen a marginal gain from one year to the next, while bitcoin's value has decreased by 75%.
The bank noted that there would be less liquidity available, which should result in "less of a drag on gold, which is more exposed to genuine demand factors." These include the purchasing habits of Asian consumers, the monetary requirements of central banks, and industrial uses.
At the beginning of this month, billionaire investor Tim Draper (2), founder of Draper Associates and one of Silicon Valley's most well-known investors, reiterated his previous price prediction of $250,000 for Bitcoin, stating that the cryptocurrency will reach that mark by June of the following year. Draper is considered one of the region's most successful investors.
There are plenty of other billionaires who share Draper's optimism toward cryptocurrency. Mike Novogratz, a billionaire investor, has stated that he still believes Bitcoin will sell at $500,000 per coin in the future. Still, he has delayed his prediction because the Federal Reserve or other central banks might raise interest rates to curb inflation.
Novogratz stated that he expects the price of Bitcoin to trade at $500,000 but "not in five years." This is under the comments of Federal Reserve chairman Jerome Powell, who found "his central banking superpowers."