Source: Adobe / ekostsov
Three recently published reports have shown again that the popular narrative about Bitcoin (BTC) as “digital gold”, a safe haven, is not that simple and the jury is still open on this question.
Analysts from Goldman Sachs, Arca and Bloomberg Intelligence discussed BTC as a store of value, safe haven or defensive asset from different perspectives. Some argued that Bitcoin and gold are not necessarily comparable, and that BTC is by no means a defensive asset, while one analyst sees a bull on the horizon for this “coming digital reserve”.
While BTC is a competitor to other crypto assets, it is not a direct competitor to gold, and the reason is its often cited volatility, analysts at US investment banking giant Goldman Sachs argued in a note, as reported by Market Insider.
“Gold competes with crypto as much as it does with other risky assets like stocks and cyclical commodities. We see gold as a defensive protection against inflation and crypto as an inflation protection risk. “
Bitcoin volatility chart:
30-day BTC / USD volatility. Source: buybitcoinworldwide.com
Meanwhile, gold isn’t the most stable asset, historically, either.
Gold price chart:
In addition, competition between Bitcoin and Ethereum (ETH), as well as other assets, prevents each of them from becoming an asset that investors would consider safe, the analysts said.
Given that Ethereum is the most popular smart contract platform, ETH “currently looks like the cryptocurrency with the highest real-world usage potential” and one that “could eventually overtake Bitcoin as the top cryptocurrency,” they added. What Bitcoin lacks despite its “stronger brand” are certain real-world use cases. However, in terms of real-world use cases, payment giant Visa said today that its consumers worldwide spent more than $ 1 billion worth of cryptocurrencies on goods and services through Visa’s crypto-linked cards in the first six months of the year.
Bitcoin is one of the worst performers of the year
“Bitcoin is not a” defensive asset “, not even within digital assets,” wrote Jeff Dorman, Chief Investment Officer (CIO) of the US investment company Arca. Defensive assets are made up of more stable assets with more consistent returns – they tend to have lower risk and tend to generate lower returns in the form of income over the long term, Dorman said, adding, “That certainly doesn’t describe Bitcoin … at all.”
While defensive assets like utility stocks, healthcare stocks and US Treasuries are expected to perform well regardless of the economic cycle, and there are companies and projects in the digital asset industry that display these traits, Bitcoin is not one of them, according to Dorman.
“This narrative that Bitcoin is the defensive asset within digital assets is even more shocking when you consider that Bitcoin is one of the worst performing digital assets in YTD [year-to-date] by far, and it continues to lag any upswing (like last week) while falling in line with the asset class during times of stress, “he said.” The only thing Bitcoin seems to be defending against is gains. “
At 10:49 UTC, BTC was trading at $ 34,701. It was up 2% in one day, down 3.5% in a week, and up 20% over the year. By comparison, ETH was trading at $ 2,380, or 5% higher than yesterday and almost 10% higher than a week ago. It recovered 222% YTD.
To make his point clear, Dorman compared Bitcoin, which is “negatively pressured by China, ESG, prominent CEOs, changes in the Fed regime and regulatory pressure,” to decentralized financial brands (DeFi) like SUSHI with a dividend yield of 14%, the Revenue booked and free, cash flow is every day regardless of the market cycle, and gaming tokens like Axie Infinity (AXS) that “have exponentially growing revenues, have equity backing and the token is explicitly backed by the company’s balance sheet assets”.
‘Decentralized reserve and store of value’
While the previous two analysts expressed certain similarities in their opinions, Bloomberg Intelligence appears to be on the other side of the debate.
Bitcoin appears to be well on its way to becoming a globally accepted decentralized reserve and store of value, said Mike McGlone, Bloomberg Intelligence Senior Commodity Strategist, adding:
“Seemingly unstoppable and competitive, the advancing measures of the money supply and the debt level are a race in most countries in which gold and its new digital version Bitcoin offer a hedge. <...> The diminishing amount versus the propensity of currencies to depreciate over time and the substantial amount of money being pumped into the system provides a solid foundation for Bitcoin’s price increase.
In addition, he argued, Bitcoin could be more than a digital version of gold. BTC’s potential path is to stabilize 100x an ounce of gold and its volatility to continue its downtrend.
Speaking of which, the falling volatility and rising share price will follow the continued migration of Bitcoin into the mainstream. “Bitcoin volatility is well positioned at the start of the second half of the year to continue its generally declining trajectory,” said McGlone, adding that partial allocations in BTC could be a prudent addition to the portfolio of low-yielding bonds.
The crypto market is likely to enter a more mature phase in the second half of the year. According to the analyst, “Bitcoin has returned in layers of support at the start of the 2H,” with chances of resuming the uptrend, possibly with some macro-drive from lower bond yields.
“If the long US Treasury bond stays below the 2% threshold, Bitcoin and gold are well positioned to be leading 2H performers – drops in 2Q could prove to be pauses in sustained bull markets. <...> Falling returns mean less competition for stores of value like gold and should improve the pricing phase of the upcoming digital reserve asset, Bitcoin. “
He added that the main factors that put pressure on BTC in the second quarter, such as energy usage issues, China’s crackdown and delayed US exchange trade funds (ETFs), are all “temporary and their solution would be fairly optimistic in the longer term “. . “
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