There’s been a lot of debate about how bitcoin compares to gold as a safe-haven asset, but one firm predicts that bitcoin won’t replace gold. In a recent white paper, Peltz International made several predictions about bitcoin.
The firm also believes bitcoin’s dominance among cryptocurrencies will be reduced in 2021.
Gold Versus Bitcoin
Peltz noted a few similarities between gold and bitcoin. Both have a limited supply and can be mined. Both have limited utility and derive value from the trust placed on them by society. Finally, both are durable and likely to last many lifetimes.
Because of these similarities, many perceive bitcoin as a store of value like gold. Some have even referred to the cryptocurrency as “digital gold” because of its safe-haven characteristics. Hedge fund manager Paul Tudor Jones argued that bitcoin futures could be a hedge against inflation caused by central banks’ money printing. He also thought about gold and other assets before considering bitcoin as a store of value.
Bitcoin Won’t Replace Gold
Anthony Tu-Sekine of Seward Kissel told Peltz that gold won’t become worthless because of the view some people have taken of bitcoin. Both will be safe havens for different reasons. Different groups of people prefer gold over bitcoin and vice versa.
Tu-Sekine said bitcoin could take up a position next to gold as a “store of value that people believe in.” He added that with the recent stimulus bills, a lot of money is floating around. Thus, people might look for assets that “are not subject to the ability of governments to just create more.”
Peltz said JPMorgan estimates that family offices invest about 0.18% of their assets in bitcoin and 3.3% of their assets in gold exchange-traded funds. The bank’s analysts add that bitcoin doesn’t threaten gold’s status as a currency of last resort. They don’t believe bitcoin’s rally will cannibalize gold’s bull market, and they think both can coexist.
Declining Dominance In The Crypto Market
Peltz also argues that bitcoin’s dominance in the cryptocurrency market will fall this year. Bitcoin made up 71.3% of the total crypto market cap at the end of the year, compared to a low of 57% in August. The performance of most other cryptocurrencies lagged bitcoin’s gains last year, and many are still far below their 2017 peaks.
In December, Ripple lost approximately 75% of its value after reaching a two-year high the month before. The SEC sued Ripple Labs in December, alleging that XRP is a security rather than a cryptocurrency. The agency accuses Ripple of making a $1.3 billion unregistered offering, and several crypto exchanges suspended trading of XRP.
Peltz believes that in 2021, other cryptocurrencies could become more prominent and increase in value. That could push bitcoin’s percentage of the total market cap lower. The firm noted that many are optimistic about Ethereum. The cryptocurrency is planning a network upgrade in 2023, which Peltz believes could result in a price increase and possibly even cause Ethereum to move on its own fundamentals instead of tracking bitcoin.