Cryptocurrency enthusiasts believe that Bitcoin has the potential to replace gold as a store of value. However, according to analyst Kristoffer Inton from the independent investment research firm, Morningstar, Bitcoin and other cryptos will never come close to replacing gold.
A Bold Claim To Make
This conclusion comes from Morningstar’s recently established framework which grades an asset’s “viability as a safe haven by focusing on liquidity, functional purpose, scarcity of supply, future demand certainty, and permanence.” When examined via this framework, the group concluded that cryptocurrencies as a whole are nowhere close to challenging gold as a “safe-haven asset class.”
In the post, Inton states that “If cryptocurrency were to displace gold’s investment case, the implications for gold prices would be devastating.” He continues, “40% of gold demand relates to investment, so a shift in investment from gold to cryptocurrency would be a seismic shock.” However, the analyst is relatively confident that such an occurrence is impossible, at least for now.
While Bitcoin may not be in any state to replace gold as of now, it’s important to note that the leading digital asset has only been around for a decade now. Gold, on the other hand, has existed for millions if not billions of years. Furthermore, while gold is a great store of value, it’s rather inefficient as a unit of exchange.
Bitcoin, on the other hand, is a globally available asset class. The blockchain-based currency has a growing use case as well, despite its current volatile state. Sure, Bitcoin has some limitations for now, but if it effectively improves on its scalability and accessibility issues, we may very well see digital assets replace gold and other traditional investment strategies.
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