Gold and Bitcoin Each Other Will Not 'Cannibalize': Analysts at Goldman Sachs

[Cordillerabit]

According to analysts from Goldman Sachs, Bitcoin will not eat gold lunch in the near future. But here's the kicker: they said bitcoin wouldn't be displaced by gold either.

In an environment of weakness in the broadband dollar and still very low and negative real rates, we do not see either asset cannibalizing each other and see enough space for both," four Goldman analysts wrote in a CoinDesk research note on Wednesday."

The note, predominantly a rather bullish take on the 2021 trajectory of gold, casts the two commodities as living at different ends of the spectrum of investment: While bitcoin (BTC, -3.47 percent) was more "risk-on," Gold remained the "defensive" play. In portfolios vs. gold, Bitcoin "serves a different role," the analysts said, mainly because of the legendary volatility of the crypto.

Last year, they attributed the underperformance of gold to a rotation into riskier asset classes, but they did not explain the role bitcoin could play in that move, as JP Morgan did last December.

The analysts steered clear of comparing gold directly to bitcoin on the correlated assets front. (In December, that correlation turned negative.) But they noted a very strong correlation between bitcoin and non-precious metals, copper, tin, zinc, which since October have steadily moved upwards.

"Bitcoin has shown a fairly tight correlation with base metals since the end of last year as both act as risks for inflation hedges with attractive long-term growth stories," the analysts wrote.

Analysts at Goldman said cryptocurrencies are uniquely sensitive to sudden price movements driven by investors and influencers. They pointed to Ripple's XRP (-7.42%) token, which tanked as the U.S. word. The unregistered securities lawsuit by the Securities and Exchange Commission began to spread (the price has largely recovered, however).

Source: Bityard