Bitcoin is the new gold –really? Goldman Sachs, or rather one of its most senior foreign exchange strategists seems to think that Bitcoin is the new gold.

The Wall Street bank speculates that Bitcoin could hit $100,000 in five years – more than double its current level – as it becomes recognised as a store of value and takes market share from gold.

The cryptocurrency celebrates its 13th year anniversary.

Fools gold? Goldman Sachs speculates that Bitcoin could hit $100,000 in five years - more than double its current level

Fools gold? Goldman Sachs believes that Bitcoin will reach $100,000 in 5 years. This is more than the current level. 

Although it might seem a bit exaggerated to claim that Bitcoin is mainstream, it certainly has progressed from its roots as an obscure currency linked with drug and money laundering.

It is held by more than 2,000,000 people in the UK. Most of these are small sums.

Fidelity, an international investment firm with conservative investors, and a good reputation for being sane, launched the first Bitcoin exchange trade fund in the US. This is one sign of increasing acceptance.

The fund, which deals in Bitcoin futures rather than the currency itself, isn’t available in the UK. The volatility of such products is a reason why our watchdogs have banned them.

Bitcoin is supported by other financial institutions, such as Melania Donald Trump, who sent anniversary wishes to her creators.

Former First Lady, has started to sell digital watercolour paintings of her eyes using NFTs (non-fungible tokens).

Twitter founder Jack Dorsey claimed to rapper Cardi B that Bitcoin will at some point replace the dollar, the world’s reserve currency. That seems a long way off, though it’s true that El Salvador now accepts it as legal tender.

It might be unfair to compare Bitcoin with its supporters. But the critics are vitriolic – one academic recently said comparing Bitcoin with a Ponzi scheme is unfair on Ponzi schemes. 

Funny thing is, Goldman Sachs was not always a fan of Bitcoin. Lloyd Blankfein was its ex-boss and warned that he expected regulators to take action against Bitcoin.

‘You don’t know whether you’re paying the North Koreans or Al Qaeda or the Revolutionary Guard,’ he said, adding that 10 per cent swings in value made the notion of Bitcoin as a store of value ‘a little bit tough’.

The Bank of England believes that crypto poses a risk to financial stability. It also facilitates money laundering.

Bitcoin’s appeal to investors appears to be based largely on FOMO, or fear of missing out on the apparently huge potential gains. 

These drawbacks are evident: They can be volatile and it doesn’t have an intrinsic value. Due to its mining, it is extremely harmful for the environment.

Many of these critics are also applicable to gold. Some argue that this metal could be benefited from increased inflation and geopolitical tensions.

We forget that gold’s beauty is what makes it precious. It has no intrinsic value. It is possible to make a large loss if you trade your ingots wrongly, as Gordon Brown can attest.

Bitcoin will not tarnish the mystique of a tradition that dates back millennia.

Beijing bubble

The saga at Chinese property company Evergrande, which has the unenviable distinction of being the world’s most indebted developer with $300billion in borrowings, rumbles away ominously. 

These troubles are indicators of an even wider crisis in debt and the collapse of Chinese capitalism.

As economist George Magnus points out, China’s property market is the most important sector in the world economy, valued at about $55trillion, twice the size of US equivalent. This puts our concerns about the housing market in perspective.

The long-term boom in Chinese real estate is due to an emerging middle class that wants to get cheap mortgages.

But, now the demographics are not in our favor. In the next twenty years, there will be a drop in first-time buyers of the typical age of 327m to 247m.

President Xi has cracked down on excessive debt, called for ‘common prosperity’ and told Communist party congress that houses are to live in, not speculate on – nesting not investing.

We are told the risks of contagion from Evergrande are low, and that it is not going to be China’s version of Lehman Brothers. But it’s hard to believe a crisis of this magnitude can be contained.

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