Goldman Sachs Global Head of Commodities Research: Bitcoin is a retail inflation hedge, but no evidence to suggest it's a substitute for gold!

Goldman Sachs' global investment economist and head of global commodity research, Jeff Currie, revealed his views on Bitcoin, gold, and copper during an interview with Bloomberg Markets' reporter Alix Steel on December 17th.

Bitcoin as an Inflation Hedge Tool

When asked about the recent surge in Bitcoin prices, Jeff Currie stated that based on price charts, Bitcoin appears to be closely related to copper.

“What do they have in common? They are both representatives of 'Risk on' assets. I believe Bitcoin is a 'retail-level currency inflation' hedge tool.”

In a report released by Goldman Sachs analysts led by Jeff Currie last week, it was pointed out that gold has recently underperformed relative to real interest rates, and the situation with the US dollar has led some investors to start worrying whether Bitcoin will replace gold as the preferred inflation hedge tool. Regarding this, Jeff Currie stated in an interview:

“The increasing popularity of Bitcoin will not threaten the status of gold. We have not seen any evidence to suggest that Bitcoin is eating into the gold market. Gold remains a defensive asset. In comparison, Bitcoin is more like commodities such as iron and copper.”

At the same time, the analyst attributed the recent decline in gold prices to the shift in investment strategies driven by the 'COVID-19 vaccine,' which has led investors to move away from defensive assets like gold towards purchasing higher-risk assets.

Gold Substitute

This executive's description of Bitcoin differs significantly from Goldman Sachs' previous views on Bitcoin. In May of this year, during a conference call held on May 27, Goldman Sachs pointed out that cryptocurrencies, including Bitcoin, are not even considered an asset class. They are unable to provide cash flow like bonds, cannot generate revenue through global economic growth, foster Ponzi schemes and money laundering, and also lack the ability to hedge against inflation like gold.

Despite the price increase leading Goldman Sachs to reassess Bitcoin, they still do not view Bitcoin as an investment commodity comparable to gold. In contrast, some analysts, including those from JPMorgan Chase, are more inclined to see Bitcoin as a 'gold substitute.'

According to previous reports, JPMorgan Chase's quantitative strategist Nikolaos Panigirtzoglou stated in an interview with Bloomberg that since October, a significant amount of funds has flowed into Bitcoin funds, propelling Bitcoin upward alongside gold. If this trend continues, more institutional investors are likely to enter the cryptocurrency market. He pointed out:

“Institutional investors have been investing in gold for many years, and it seems they are just starting to realize Bitcoin.”

JPMorgan Chase data shows that since October, nearly $2 billion has flowed into Grayscale's Bitcoin investment trust fund GBTC, while gold ETFs have seen outflows of $7 billion.Furthermore, more and more institutions have publicly announced increasing their Bitcoin positions in their portfolios. The UK asset management company Ruffer recently revealed that they have reduced their gold holdings and allocated 2.5% of their assets to invest in Bitcoin as a hedge against inflation.