Bitcoin Will Never Replace Gold – Morningstar Analyst

Kristoffer Inton, an analysts from investments ratings firm Morningstar, said that bitcoin and other cryptocurrencies will never come close to replacing gold.

In his recent Morningstar Minute article, Inton said that they’ve created a framework to grade any asset class’ viability as a safe haven by focusing on liquidity, functional purpose, scarcity of supply, future demand certainty, and permanence. Through this framework, they conclude that bitcoin and other cryptocurrencies does not and will not challenge gold as a safe-haven asset class.

Inton noted that cryptocurrencies have garnered the attention of even the most unsophisticated investors, and if bitcoin did begin to replace gold as a safe haven asset, it would represent a “seismic shift” in the investment case for the precious metal.

“If cryptocurrency were to displace gold’s investment case, the implications for gold prices would be devastating,” Inton said. “40% of gold demand relates to investment, so a shift in investment from gold to cryptocurrency would be a seismic shock.”

Since its creation in 2009, bitcoin has been described as gold 2.0, or a better version of the precious metal. Bitcoin’s parabolic rise was the big story of 2017, but its price has fallen 52%. Currently, bitcoin has a market cap of $113 billion.

In July of this year, Gabor Gurbacs, director of digital asset strategies at VanEck/MVIS, said that if 10% of the gold trade were to shift into bitcoin, it would more than triple its market cap.

“Gold today has around $7 trillion outstanding. If you take, say, 5 to 10 percent — I’ll let everyone do the math — bitcoin has upside,” Gurbacs said. “Bitcoin is used as digital gold today. It’s a de-risk asset. Basically if someone wants to outlay systematic risk, then one would go to access gold or digital gold (bitcoin).”