Crypto bulls have started forecasting that Bitcoin and cryptocurrencies would steal the title of safe haven from gold. Nigel Green, chief exec of financial advisory and fintech deVere Group, says that “Bitcoin will replace gold as the ultimate financial safe haven within a generation”. And the rationale behind it is all to do with millennials and Gen Z.
These younger generations are set to inherit some $60 trillion worth of wealth – “the biggest-ever generational transfer of wealth” from the ‘Baby Boomer’ generation.
According to cryptocurrency exchange Kraken, a growing population of Australian investors are seeking to diversify their assets away from traditional ASX-listed blue chip companies in favor of alternate assets, such as digital currencies.
As Green says, for thousands of years, gold has been the ultimate financial safe haveen and now it’s bitcoin turn.
“It’s always been the go-to asset in times of political, social and economic uncertainty as it is expected to retain its value or even grow in value when other assets fall, therefore enabling investors to reduce their exposure to losses.
“Moving forward, older investors are likely to continue with gold, but millennials and Generation Z, who are so-called ‘digital natives’, can be expected to go for Bitcoin and other digital currencies instead.
“I believe that the precious metal will lose its crown as the most sought-after reserve asset to Bitcoin within a generation – particularly because the biggest-ever generational transfer of wealth, likely to be more than $60 trillion — from baby boomers to millennials is already underway.”
Green notes that Bitcoin’s key characteristics like its fixed supply and how transactions are immutable, distributed, non-sovereign and decentralized, are very attractive for investors in an uncertain but increasingly digitalzsed, tech-driven world.
“It has already earned it the label ‘digital gold’ and I believe its status in this regard will grow exponentially over the next year or two, especially with the economic fallout from Covid-19, central banks’ record-shattering levels of money-printing, heightening trade tensions between economic superpowers, and mounting social and political unrest.”
Caroline Bowler, CEO of Australian cryptocurrency and digital asset exchange BTC Markets, says that while gold has been considered a successful store of wealth for centuries and Bitcoin has been there for little more than a decade, it isn’t necessarily a “zero sum game”.
“Bitcoin is on track to mature as part of a new asset class, with in-built deflationary attributes,” she told Stockhead.
“I’m not an investment advisor but this characteristic alone burnishes its safe haven reputation.”
However, Bowler cautioned investors to weigh the two assets against their own portfolio needs.
“Gold and Bitcoin differ primarily on the technical aspects – storage, distribution, transaction speed for example,” she said.
“These may be increasingly relevant as we move deeper in to the digital age of investment.”
But the gold analysts are not convinced.
Why Bitcoin won’t dethrone the traditional safe haven
Gavin Wendt, MineLife founding director and senior resource analyst, says gold has a 5,000-year history as a long-term store of wealth – and it’s faced a lot of challengers, such as various types of financial instruments over recent decades that were supposed to render gold obsolete.
“Instead, what we are seeing totally contradicts that notion — gold is trading at close to all-time record highs and has taken another ‘barbarous financial relic’ along for the ride, silver,” he told Stockhead.
“One of the most important factors that gold has in its favour is that there is always a ready and liquid market to trade it, because it has been universally accepted throughout the history of mankind.
“Now, the issue facing Bitcoin is that it is open to competition itself – who says other crypto-currencies won’t come along and unseat it? If Bitcoin is still around in 5,000 years, then we can start to have a discussion.”
Hedley Widdup, investment manager at Lion Selection Group, says for something new to claim the crown from gold as the ultimate financial safe haven, it would require to prove to be more attractive than gold has been for a long time.