A professor of Finance as the Wharton School of Finance believes that Bitcoin is the new Gold, especially for the younger populace. He said that the digital currency has replaced the yellow metal as an inflation hedge for this demographic and presented statistics to support his argument. He gave these comments during a recent interview with in the hit CNBC show Squawk Box.
Bitcoin has a had an overall bullish last year with the digital currency recording an almost 68% calendar year price increase from around $28k to around $47k at the close. Gold on the other hand has lagged far behind and despite showing some appreciation in 2020, it started 2021 at around $1945 (near all time highs) and finished at $1820. While the overall change in the precious metal’s price is not too much and speaks of its stability, it didn’t prove to be a hedge against inflation at all because the latest Consumer Price Index (CPI) or inflation in simple words is anywhere between 6-20% around the world. Gold lost around 5% of its value last year and mostly trended downwards even in this inflation-ridden year.
Jeremy Siegel, the professor in question said:
“Let’s face the fact, I think Bitcoin as an inflation hedge in the minds of many of the younger investors has replaced gold. Digital coins are the new gold for the Millennials. I think that the story of gold is a fact that the young generation is regarding Bitcoin as the substitute.”
Siegel also reminisced around how Gold rose strongly during the financial crisis of the 1970s when USD was unpegged from the precious metal. That is when it was declared as a safe bet during times of crisis. However, that role is diminishing at the moment and the younger generation clearly as more faith in the premier digital currency than Gold itself.
While Bitcoin is definitely more volatile than Gold and that is a drawback for some users, several top investing minds, many of whom were former critics now believe that Bitcoin is now actually a better store of value and thus a hedge against inflation than the yellow metal itself. Popular Shark Tank host and billionaire tech mogul Mark Cuban stated that Bitcoin was now better than its metallic alternative in October 2021. Institutional investor Barry Sternlicht went even further and stated that Gold is worthless and that is why he is holding on to his Bitcoin stash.
While one year’s performance cannot be a definitive answer to the question which is better, it is clear that the tides are changing and the yellow metal no longer inspires the same confidence as before. As Bitcoin may enter a bear market and if Gold can post somewhat of a rally, things can definitely change by the end of this year but both assets are expected to remain here for a long time, even if with a diminished status.
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