Gold May Turn Out As A Better Long-Term Investment, Wall Street Giant Reports

The Role Of Bitcoin As A Long-Term Store Of Value And Hedge Against Inflation May Crack Under The Pressure

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As the crypto world still struggles to gain traction due to volatility and worldwide inflation, a research note from Wall Street giant Goldman Sachs shows that gold may solidify its position as the world’s most preferred long-term investment.

Indeed, the bank noted that Bitcoin and the crypto economy still await a non-speculative use case, while gold can be a “useful portfolio diversifier”. Furthermore, analysts from Goldman Sachs added that Bitcoin and gold are used in two different ways – while gold is still used by traders to hedge against inflation and dollar debasement, Bitcoin traders are behaving more like interacting with a “risk-on high-growth tech company stock.”

The analysts emphasized that Bitcoin is a “solution looking for a problem” that is generating value through future use cases, which turns into a more volatile and speculative asset than the precious metal.

2023 predictions, according to Goldman Sachs

Meanwhile, the bank also made its unofficial predictions for 2023, citing that as financial conditions become tighter, investors’ willingness to explore decentralized digital currencies may continue to plummet. The bank commented that 2022 brought immense stress for the crypto sector after the episodes with Three Arrows Capital, lenders BlockFi and Celsius, and FTX.

“Bitcoin’s volatility to the downside was also enhanced by systemic concerns as several large players filed for bankruptcy,” the bank wrote.

Meanwhile, the bank saw the net speculative positions in both gold and Bitcoin shrink in 2022, with gold leading Bitcoin in value increase in the past year, while Bitcoin lost a hefty 75% of its value in the same period. However, gold may face tighter liquidity due to a “smaller drag on gold, which is more exposed to real demand drivers.”

Some investors, however, remain bullish on Bitcoin’s price behavior, as billionaire investor Tim Draper confirmed his prediction that Bitcoin would rise all the way to $250,000 per BTC. Draper added that his initial prediction is scheduled for the end of 2022, but now he is extending his prediction by six months.

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