Because of the potential as a long-term asset Bitcoin is often considered as digital gold. However, crypto pessimists always argue about the legitimacy of Bitcoin and other digital assets. Recently an equity analyst from one of the world’s most respected investment research firm, Morningstar said that Bitcoin will not challenge gold as a safe haven asset class.
According to Kristoffer Inton the equity analyst, after evaluating Bitcoin, I have found that Bitcoin does not have viability to be considered as a safe haven asset. The parameters on which Kristoffer judged the top cryptocurrency were liquidity, scarcity of supply, future demand certainty, functionality, and permanence. After evaluating the Bitcoin Kristoffer concluded that Bitcoin failed to meet the necessary criteria though he did not specify the details of the evaluation. Kristoffer said that “In order to access the threat, we have created a framework to grade any asset class’s viability as a safe haven by focusing on liquidity, functional purpose, scarcity of supply, future demand certainty, and permanence. Through this framework, we conclude that cryptocurrency does not and will not challenge gold as a safe haven asset class.”
In the Morningstar Minute, the short form commentary series of Morningstar Research Service equity analyst Kristoffer Inton wrote that if Bitcoin did begin to replace gold as a safe haven asset, it would represent a seismic shift in the investment case for gold as 40% of precious metal demand comes from investors. According to Kristoffer, if cryptocurrency replaces the investment case of precious metal, the implication on the price of gold will be devastating. As 40% of gold demand is related to the investors so a shift in investors choice from gold to cryptocurrencies can drastically reduce the demand for gold. Because of the decreased demand, the price of the gold can reduce significantly which can cause a seismic shock.
Many Bitcoin investors argue that the primary use of flagship cryptocurrency is as digital gold through the top cryptocurrency is currently quite volatile but it possess many of attractive features of gold such as liquidity and scarcity some drawbacks of Bitcoin are lack of portability and impracticality for payments through many Bitcoin enthusiasts believe that multilayer scaling solutions such as Lightning Network (LN) will eventually make Bitcoin a viable payment instrument. Earlier this year the billionaire investor Peter Thiel said that he is long on Bitcoin even if it never matures as a payment instrument.