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Goldman Sachs’ global head of commodities research, Jeff Currie, classified Bitcoin as a “risk-on” asset akin to copper as an inflation hedge.
Goldman Sachs’ global head of commodities research, Jeff Currie, dismissed parallels between Bitcoin and gold as an inflation hedge, describing BTC as more analogous to a “risk-on” asset like copper.
Speaking on CNBC’s Squawk Box Europe on June 1, Currie noted that copper and Bitcoin both work as “risk-on assets” for hedging due to their volatility while describing gold as a more stable “risk-off” hedge”:
“Digital currencies are not substitutes for gold. If anything, they would be a substitute for copper, they are pro-risk, risk-on assets. They are a substitute for risk on inflation hedges not risk-off inflation hedges”
“You look at the correlation between Bitcoin and copper, or a measure of risk appetite and Bitcoin, and we’ve got 10 years of trading history on Bitcoin — it is definitely a risk-on asset,” he added.
Currie’s remarks follow the current crypto collapse, which has seen Bitcoin’s price drop 36.8 percent in a few weeks, according to CoinGecko, falling from over $57,000 on May 12 to approximately $36,000 today.
Ethereum has also seen a similar drop, falling 39.58 percent from over $4,300 on May 12 to roughly $2,598.
Copper has had a high level of volatility in 2021. It was priced at $3.56 on January 3 and had risen to $4.30 by February 24. From March through May, the price ranged between $3.50 and $4.00 before peaking at $4.80 on May 10. The price has been reduced to $4.65.
Currie stated that “there is good inflation and bad inflation,” which different assets hedge against, and that “good inflation is when demand pulls it,” and that “Bitcoin, copper, and oil are hedges against this type of inflation.” Nonetheless:
“Gold hedges bad inflation, where supply is being curtailed, which is … focused on the shortages on chips, commodities, and other types of input raw materials. And you would want to use gold as that hedge.”
In an April note, Goldman Sachs’ CEO argued that Bitcoin cannot yet be viewed as digital gold because it is “vulnerable to losing store-of-value demand to another, better-designed cryptocurrency,” adding, “We think it is too early for Bitcoin to compete with gold for safe-haven demand, and the two can coexist.”
According to TradingView, gold has been on an upward trend since April 1, rising from $1686 to $1900 as of today.
Currie noted in a Monday letter that he believes commodities with real-world applications are the greatest hedge against inflation since they rely on demand rather than 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.”
“As a result, they hedge short-term unanticipated inflation, created when the level of aggregate demand is exceeding supply in the late stages of the business cycle,” the note added.