According to analysts at Goldman Sachs (NYSE:). gold as a more useful portfolio diversification than . In the long term, experts also believe that the precious metal will outperform the cryptocurrency.
As Goldman Sachs explains, the yellow metal, which has real demand drivers, hasn’t been hit by the tightening of financial conditions as much as bitcoin. Analysts point out that gold has clear non-speculative applications, while cryptocurrency is still exploring in this regard.
While the market treats Bitcoin as a risky, high-growth tech stock, the gold men said, gold is seen as a hedge against dollar depreciation and inflation. The world’s largest cryptocurrency, on the other hand, is still a “solution in search of a problem” or Bitcoin’s potential lies in possible future applications, according to Goldman Sachs.
Bitcoin usage has grown as investors have taken interest in decentralized currencies, but tighter financial conditions are not working for cryptocurrency. Additionally, e-money has been compounded by systemic concerns, with several major players in the sector filing for bankruptcy, including cryptocurrency exchange FTX and hedge fund Three Arrows Capital, analysts said.
While bitcoin lost around 60% in value in the same period last year, it remained more or less unchanged. Going forward, Goldman Sachs believes the precious metal will benefit from increased macro volatility and the need to diversify out of equities. Additionally, lower liquidity will weigh less on gold than on Bitcoin, he said. Experts see physical demand, central bank purchases, which are already at record highs this year, purchases of gold for risk hedging and industrial applications, as drivers of gold demand.
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