Bitcoin Looks More Like Risky Digital Copper Than Gold As A Hedge Against Inflation, Says Goldman Sachs Senior Commodity Analyst | Currency News | Financial and business news
- Bitcoin is closer to “digital copper” than “digital gold,” according to Goldman’s senior commodities analyst.
- This is because bitcoin and copper act as “at risk” inflationary hedges, while gold is “at risk,” he said.
- Commodities remain the best hedge against inflation because they depend on demand, the bank’s research team said.
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Investors should see digital currencies as a substitute for copper rather than gold, Jeff Currie, global head of commodities research at Goldman Sachs, told CNBC Tuesday.
“You look at the correlation between bitcoin and copper, or a measure of risk appetite and bitcoin, and we have 10 years of trading history in bitcoin – it’s definitely a risky asset,” Currie told CNBC “Squawk Box Europe.”
He said bitcoin and copper both operate as “risky” inflationary hedges, or situations in which investors have a higher risk appetite. Gold is a more “risky” asset, where investors seek refuge when stocks sell.
Copper prices topped $ 10,000 per tonne for the first time in ten years last month, as the economic reopening sparked a rally in the metal. Demand has increased as it is seen as an essential part of the transition to a green energy economy. Although prices fell sharply towards the end of May, they rebounded again.
Currie’s comments came after a few crazy weeks for cryptocurrencies. Bitcoin was last trading 2% at around $ 37,190 on Wednesday, and is up around 28% so far this year. The digital token has lost more than 25% of its value in the past three months amid a large crypto sell-off after Tesla suspended bitcoin payments and China announced that digital tokens cannot be used for business.
Read more: Financial researcher Nik Bhatia explains why growth-driven asset managers could be violating their fiduciary duty if they don’t consider bitcoin – and compares crypto to Amazon stock 20 years ago
Currie, who is one of the most followed commodities experts, pointed out that bitcoin and copper are more similar when it comes to acting as a hedge against inflation – a strategy that involves investing in assets that outperform the market when central bank policy pushes prices up. .
“There is good inflation and there is bad inflation. Good inflation is when demand pulls it up, and that’s what bitcoin covers, that’s what copper covers, that is. what oil covers, “Currie told CNBC.
“Gold covers bad inflation, where supply is tight, which focuses on shortages of chips, commodities and other types of commodities. And you would want to use gold as a hedge,” he said. he declared.
In a research note released Monday, Currie and his team said commodities remain the best hedge against inflation because they are driven by demand, not growth rates. “Commodities are spot assets that do not depend on forward growth rates but on the level of demand relative to the level of supply today,” the strategists wrote.
“As a result, they cover for unforeseen short-term inflation created when the level of aggregate demand exceeds supply in the later stages of the business cycle.”