Report: Cryptocurrency Market Value Almost Equal to the Value of Gold Held for Private Investment Purposes

The total value of the cryptocurrency market is now over $2 trillion, nearly equal to the amount of gold held for private investment purposes.

Report: Cryptocurrency Market Value Almost Equal to the Value of Gold Held for Private Investment Purposes

FX168 Financial News Service (North America) – Bullish cryptocurrency advocates have long supported bitcoin as a modern alternative to gold, and in some ways the new market is close to achieving the major milestone of surpassing gold in this regard.

A new report released Tuesday (May 18) by Bernstein & Company (Bernstein) shows that the cryptocurrency market is now worth a total of more than $2 trillion, nearly equal to the amount of gold held for private investment purposes.

“Investors need to find return streams that hedge against the risk of devaluation and diversify equity exposure at higher levels of inflation. These assets (cryptocurrencies) may have the potential to serve this function,” the firm said in a report to clients on Tuesday.

Backed by corporate and institutional players, cryptocurrencies have gone mainstream, with investors increasingly seeing digital currencies as a reliable store of value and a way to diversify their portfolios. Bitcoin, the largest cryptocurrency, was trading at about $43,300,000 on Tuesday, with a market capitalization of about $800 billion, according to Coin Metrics.

But Bernstein is quick to point out that both gold and digital currencies have other uses. According to Bernstein’s calculations, if you include gold jewelry, the market for the precious metal is worth nearly $8 trillion, about four times the market for cryptocurrencies.

In addition, there are important differences between cryptocurrencies. Bernstein said bitcoin is primarily used for value storage, while other digital currencies such as ethereum function as more than just an investment.

Bernstein’s comments echo the sentiments of some large fund managers who point out that the ease of trading bitcoin could make it more attractive than gold as a safe-haven asset and a hedge against inflation.

Bill Miller, founder and chief investment officer of Miller Value Partners, said in April this year: “It’s easy to transport, if you have a smartphone, it can be sent anywhere in the world, so as a means of preserving value, it’s much better than gold.”

Rick Rieder, chief investment officer of global fixed income at BlackRock, noted, “Bitcoin is much more viable than passing gold bullion around.”

Nonetheless, Bitcoin’s long-term viability remains in question, including from a regulatory and environmental perspective. Bitcoin prices fell last week after Tesla CEO Elon Musk said the company would suspend accepting bitcoin as a form of payment for vehicles due to “the rapid increase in fossil fuels used for bitcoin mining.” Musk later clarified on Monday that the company had not sold any bitcoin positions. The company first disclosed a bitcoin position worth $1.5 billion in February of this year.

Looking ahead, Bernstein’s Harshita Rawat believes that bitcoin could replace gold once some regulatory and environmental issues are resolved.

She noted:- “Bitcoin can be more easily used as a store of value anywhere in the world (especially in countries where fiat currencies are unstable) and is very liquid.” She noted that the cryptocurrency has a 24X7 network and can be traded almost instantly. “The impact as a store of value, especially in certain countries/regimes, is significant.”

She said Bitcoin and cryptocurrencies in general have “reached a tipping point” in terms of “institutional/retail adoption, dollar investment, industry talent and liquidity.”

Still, Rawat’s colleague Inigo Fraser-Jenkins isn’t sure how investors will view bitcoin in the long run. He notes that gold has been around for 5,000 years, while investors only recently thought that bitcoin would retain its value.

He believes it will take many years for Bitcoin to build broad enough trust to make it a truly secure asset. “There are very broad economic, legal and cultural issues involved here. Any claim that these issues can be overcome in a short period of time seems difficult to accept because of their deeply social nature.”

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