Morgan Stanley: Bitcoin is Better Than Gold in Many Aspects
Since 2016, a growing number of investors and traders have begun to adopt bitcoin as a safe haven asset or digital gold. Its fixed supply and decentralized nature have allowed bitcoin to become the perfect hedge against economic uncertainty and global markets instability.
Bitconnect previously reported that the conflict between the US and North Korea, which has intensified over the past few weeks, is fueling the demand towards bitcoin amidst equity markets sell-off
Earlier this week, Tom Price, equity strategist at the $88.9 investment banking firm Morgan Stanley, noted that bitcoin is better than gold in many aspects. It has significantly higher liquidity, transportability and better monetary policy which limits its supply.
Price emphasized that a growing number of institutional and professional investors are considering bitcoin as a viable safe haven asset and in many cases, improved hedge against economic uncertainty than gold.
“Some claim that the protocol limiting bitcoin’s supply growth rate, underpins its value, But if bitcoin is successful long term, we should continue to see competitor cryptocurrencies and market strategies emerge to exploit the new economic rent — a bearish risk for bitcoin’s price. [Bitcoin is] the latest money to offer gold’s long standing capabilities plus some other unique benefits. While it too may somehow undermine gold’s demand outlook, the rate/scale of the shift depends on the willingness of investors to engage bitcoin/cryptocurrencies,” said Price.
Similar to the analysis of prominent stock researchers and analysts from multi-billion dollar banks like JPMorgan and Goldman Sachs, Price expressed his optimism towards bitcoin and the market’s confidence in the digital currency.
However, bitcoin and blockchain analysts including Spencer Bogart from Blockchain Capital countered the argument of Price that the scale of the willingness of investors to engage in bitcoin is a non-issue because bitcoin has demonstrated better qualities as a store of value and a currency than gold.
“If we think about the qualities that make gold a respected ‘money’ or store of value, bitcoin is actually superior in many regards. [But] gold has something very important that bitcoin lacks: a more than 1,000-year history of being a decent store of value. This is very important for trust and people’s willingness to store value in that particular asset,” Bogart explained.
More importantly, the bitcoin and cryptocurrency markets have grown to a point where Price’s statement on the trust between investors and bitcoin can no longer be considered an issue. The $140 billion market cap of cryptocurrencies demonstrate solid trust between investors and the market. Additionally, liquidity for large-scale institutional and retail investors is drastically increasing and improving, due to the efforts of conglomerates including the Chicago Board Options Exchange and leading bitcoin exchanges Gemini and Coinbase.
As a store of value, long-term investment, a safe haven asset and a digital currency, in terms of infrastructure, liquidity and transportability, some of the largest financial institutions consider bitcoin superior to gold.
Rapid Adoption of Bitcoin: Mainstream Media, Institutional Investors, Merchants
Bitcoin price has surpassed the $4,000 mark and achieved its new all-time high at $4,419 in global average. The upward momentum of bitcoin price and increasing adoption from institutional investors have led to increasing mainstream coverage from networks like the Wall Street Journal, that have served the traditional finance sector over the past few decades.
Since early 2017, as major investment banks and firms including Fidelity, Goldman Sachs and JPMorgan started to adopt and embrace bitcoin, mainstreammedia networks have begun to offer extensive coverage on bitcoin alongside precious metals such as gold and reserve currencies like the US dollar and the Chinese yuan.
In within 8 months, the bitcoin and cryptocurrency markets have matured significantly, with the cryptocurrency market cap increasing from around $10 to $140 billion. More importantly, the daily trading volume of bitcoin is closing on the $3 billion mark. Such rapid increase in the trading volume of bitcoin has demonstrated drastic improvement in bitcoin’s liquidity, which analysts including CNBC’s Brian Kelly emphasized as a key factor towards facilitating the rising demand from institutional investors.
For mainstream media companies like the Wall Street Journal and financial institutions such as Goldman Sachs, it has become increasingly difficult to ignore the cryptocurrency market due to its market cap and exponential growth. In fact, in a note to its investors, clients and portfolio managers, Goldman Sachs stated that bitcoin can no longer be disregarded.
“Whether or not you believe in the merit of investing in cryptocurrencies (you know who you are), real dollars are at work here and warrant watching,” said Goldman Sachs analysts Robert Doroujerdi and Jessica Binder Graham.
Goldman Sachs also told its investors that the cryptocurrency market has grown to a point wherein investors that do not understand the technical intricacies of cryptocurrencies should still consider investing in the market due to its sheer rate of growth.
“The debate has shifted from the legitimacy of the ‘fiat of the Internet’ to how fast new entrants are raising funds. Whether or not you believe in the merit of investing in cryptocurrencies (you know who you are) real dollars are at work here and warrant watching especially in light of the growing world of initial coin offerings (ICOs) and fundraising that now exceeds Internet Angel and Seed investing,” said Goldman Sachs.
As major financial institutions including the Chicago Board Options Exchange (CBOE) and leading bitcoin companies such as the $1.6 billion bitcoin wallet and trading platform Coinbase continue to target institutional and retail investors, mainstream adoption of bitcoin will continue to increase at a rapid rate.
Is US-North Korea Tension Fueling Demand For Bitcoin?
Over the past week, many analysts including Panos Mourdoukoutas, Professor at LIU Post in New York and Columbia University, described the tension between the US and North Korea as one of the driving factors behind the recent rally of bitcoin price.
Since the beginning 2016, an increasing number of investors and traders have started to perceive and adopt bitcoin as a safe haven asset. Investors in China, the US and South Korea have begun to rely on bitcoin to avoid potential economic uncertainty and financial instability, as a means to protect their wealth.
Amidst serious international conflicts and build up of tension amongst leading economies such as theUS, China, South Korea and Japan, the performance of stocks, currencies and assets tend to decline, except for safe haven assets such as gold and bitcoin. Mourdoukoutas explained that tensions in Asia have led to equity market sell-offs, leading to rising demand towards bitcoin, gold and US Treasuries. According to Mourdoukoutas, bitcoin has become the new hedge against global uncertainties.
“A rise in international tensions compounds other factors which make digital currencies attractive. There’s a growing mistrust of national currencies, for example, following a number of government policies that have pushed more investors to Bitcoin. And there’s scarcity. Bitcoin supply is expected to be limited to 21 million,” wrote Mourdoukoutas.
For the most part, the assessment of Mourdoukoutas of bitcoin and the rise in the demand towards digital currencies is accurate. As a recent Business Insider report emphasized, bitcoin is immune to market volatility and international economic instability.
Hence, analysts including Mourdoukoutas have attributed the recent rally of the bitcoin price to an increase in demand from institutional and large-scale investors in the US and Asia that are looking to protect their wealth and portfolio from unexpected market instability. Considering the magnitude of the conflict between the US and North Korea, Mourdoukoutas noted that investors would rather hold bitcoin than any regional currency.
“To begin with, they raise the prospect of war, which undermines the demand for regional currencies like the yen, the yuan, and the won, and boosts demand for Bitcoin. Simply put, when the first missile flies, either intentionally or accidentally, investors would rather hold Bitcoin than any regional currency,” he said.
Earlier this week, the price of bitcoin surpassed $4,200, establishing its new all-time high and demonstrating the market’s overwhelming confidence in the digital currency’s ability to scale. More importantly, bitcoin has shown resilience towards the August 1 Bitcoin Cashhard fork, eliminating uncertainty in regards to a potential network split and restoring trust of investors and traders toward bitcoin.
In the upcoming weeks,, as tension amongst China, the US, North Korea and South Korea increases, the demand towards safe haven assets like bitcoin will likely increase, sustaining bitcoin’s current upward momentum.