Goldman Sachs Sees Gold Outperforming Bitcoin in the Longer Term

Bitcoin adoption will need to be driven by the development of real uses rather than speculative interest, the report said.

AccessTimeIconDec 13, 2022 at 11:35 a.m. UTC
Updated Dec 13, 2022 at 4:20 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Bitcoin’s (BTC) value proposition is based on the cryptocurrency’s potential usefulness. Its level of future adoption, therefore, is more sensitive to changes in interest rates – or has a longer duration – than gold, Goldman Sachs (GS) said in a research report Monday looking at the benefits of both assets in a diversified portfolio.

In the last year came the “end of a decade of easy money” as central banks raised interest rates saw a sharp reduction in speculative positions in gold and bitcoin, the report said. However, gold is roughly unchanged year on year, whereas bitcoin is down 75%, in line with high-growth tech companies.

Tight financial conditions are expected to be a drag on bitcoin’s user adoption, the report said, and this makes a repeat of the cryptocurrency’s strong returns of the last decade less likely. Volatility will likely remain elevated until it develops more use cases.

“The development of real use cases is also crucial to reducing bitcoin’s volatility, but is by no means guaranteed and may take a long time to play out,” analysts Mikhail Sprogis and Jeffrey Currie wrote.

Goldman says such conditions will be a smaller drag on the price of gold as it is a “shorter duration real asset with developed user cases,” adding that the metal “may benefit from structurally higher macro volatility and a need to diversify equity exposure.”

The cryptocurrency’s adoption has been boosted by easy financial conditions, the bank said, with some investors more willing to “explore low liquidity, high risk/return options like bitcoin.” With tighter financial conditions expected moving forward, speculative interest in bitcoin is likely to decline.

Bitcoin is more levered to financial conditions than gold because the metal has “developed non-investment cases today while bitcoin is still looking for one,” the note said, adding that BTC is a “solution looking for a problem.” The majority of bitcoin supply has not moved for over a year, which suggests that it is being held for investment purposes, the note added.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.

Author placeholder image

Will Canny is CoinDesk's finance reporter.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.


Read more about