Just like we argue that silver is the poor man’s gold, gold is maybe becoming the poor man’s crypto,” Goldman Sachs’ Head of Energy Research Damian Courvalin told Bloomberg in an interview as he discussed the state of metals market. Courvalin was responding to a question on whether assets other than gold like cryptos and Bitcoin are being used by investors to hedge against inflation. “I think it’s actually starting…We’ve argued historically that crypto and gold do not have to cannibalize each other.”
“The value of crypto is its network, just like the value of oil is the fact that it’s consumed. Gold, like diamonds and art, doesn’t have that. It’s just a pure defensive asset that can outperform over a significant period of time,” Courvalin added.
However, there has been a substitution. For instance, China started to ban cryptos in late September and there have been signs of strong gold demand in China, he said. “At this point, there may be enough wealth to allocate to both (Gold and Bitcoin), especially, I think, as that inflation signal is starting to be more pressing,” said Courvalin.
In October this year as well, the global investment bank JPMorgan had said in a note that institutional investors appear to be returning to bitcoin perhaps seeing it as a better inflation hedge against gold, said a report by Markets Insider, adding that the earlier trend of money moving out from gold and going into bitcoin has re-emerged in recent weeks.
As per the bank, over $10 billion has flowed out of gold ETFs since the beginning of the year while over $20 billion has flowed into bitcoin funds, the report noted. This had helped bitcoin’s share in the crypto market to increase to nearly 45 per cent from 41 per cent in mid-September. According to CoinShares, the digital asset investment products saw inflows worth $174 million in November’s first week, marking the 12th consecutive week of inflows. As a result, inflows into digital assets stood at $8.9 billion in the year so far vis-a-vis $6.7 billion in 2020.