Bitcoin has shot to a record just as billions of institutional dollars have fled gold.
Whether that’s a simple coincidence or the start of a rotation that would have a profound impact on crypto and the precious metals market is impossible to know for sure. But the debate is now heating up on whether the world’s largest digital currency can one day rival bullion as an inflation hedge and portfolio diversifier.
Bitcoin’s tumble last week, the biggest since March, after a 150 per cent run-up this year underscores the famous volatility of the asset class that has kept mainstream investors at bay. Yet, if they start moving just a small portion of their gold holdings into the $350 billion Bitcoin industry, it would be a game-changer for diversification strategies on Wall Street.
“Gold was really the safe asset of the past world and baby boomer generation,” said Jean-Marc Bonnefous, a former commodities hedge fund manager turned crypto investor. “Now it’s being replaced by automated assets like Bitcoin.”
The digital currency is a trading ground for a motley crew of retail players, speculative pros and exotic quants, while traditional investors have hitherto stayed on the sidelines. That seems to be changing with Guggenheim Partners just the latest manager to join the bandwagon, alongside Paul Tudor Jones and Stan Druckenmiller.
Funds like family offices are selling their gold exchange-traded fund holdings for the digital currency, according to analysts at JPMorgan Chase. Bullion-backed funds have dropped 93 tonnes of metal, worth some $5bn since November 6. Grayscale Bitcoin Trust, the preferred vehicle for institutional investors, has doubled in dollar terms since the start of August.
Bitcoin’s market capitalisation is currently only 3.1 per cent the size of gold, according to James Butterfill, an investment strategist at CoinShares, which sells investments in digital currencies. If that increased to 5 per cent, it would imply a price of $31,300 compared to around $19,000 currently, he estimated.
“Bitcoin is establishing itself as a credible store of value,” Mr Butterfill said. “This is particularly appealing during this time of unprecedented loose monetary policy. For these reasons, investors are naturally comparing it to gold.”
Gold was really the safe asset of the past world and baby boomer generation. Now it's being replaced by automated assets like Bitcoin
Still, there are good reasons for bullion’s poor performance recently, such as progress towards a coronavirus vaccine that has reduced demand for havens. With market-derived inflation expectations relatively stable, one conclusion might be that gold is simply moving along with animal spirits, while Bitcoin has been in a speculative fervour.
The latter has also found a fan at the world’s largest asset manager – evidence of its growing appeal on Wall Street. The currency is “here to stay” backed by demand among millennials and its strength as a medium of exchange, Rick Rieder, chief investment officer for fixed income at BlackRock, told CNBC in a recent interview. Trading Bitcoin “is so much more functional than passing a bar of gold around”, he added.
One of the differences between the two is that all transactions can be viewed on the blockchain, while a large part of gold trade takes place on London’s over-the-counter market, where less data is available.
“The transparency in Bitcoin is helping drive a lot of interest,” said Lyle Pratt, an independent investor who owns Bitcoin. “Gold is kind of like a blackbox, you have to trust the custodians to tell you about any flows in the market.”
Even if Bitcoin has potentially a bigger upside in an inflationary spiral, the risks are just too big, said Patrick Armstrong, chief investment officer at Plurimi Wealth, who allocates 6.5 per cent of his discretionary funds into gold. Gold also has a long history as a store of value that Bitcoin can’t match. There’s always the nagging suspicion that another, potentially central-bank backed, digital currency could supplant it.
“If the debasement trade works, it is very possible Bitcoin works better,” he said. “But it is also possible Bitcoin has no value in years to come, while I do not think the same can be said of gold.”
One thing that’s clear is Wall Street is taking Bitcoin seriously in a way that it didn’t in 2017. “I have changed my mind!” wrote Inigo Fraser-Jenkins, a strategist at Sanford C. Bernstein, in a report on Monday. Bitcoin won’t replace gold, but there’s room for both, he said, especially if the future is one of inflation and extreme debt levels.
“I see it as being complementary,” he added. “Whatever one’s starting position was before the pandemic in terms of what your gold and crypto allocation should be, I think it should be materially larger now.”
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
Going grey? A stylist's advice
If you’re going to go grey, a great style, well-cared for hair (in a sleek, classy style, like a bob), and a young spirit and attitude go a long way, says Maria Dowling, founder of the Maria Dowling Salon in Dubai.
It’s easier to go grey from a lighter colour, so you may want to do that first. And this is the time to try a shorter style, she advises. Then a stylist can introduce highlights, start lightening up the roots, and let it fade out. Once it’s entirely grey, a purple shampoo will prevent yellowing.
“Get professional help – there’s no other way to go around it,” she says. “And don’t just let it grow out because that looks really bad. Put effort into it: properly condition, straighten, get regular trims, make sure it’s glossy.”
The specs
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The Birkin bag is made by Hermès.
It is named after actress and singer Jane Birkin
Noone from Hermès will go on record to say how much a new Birkin costs, how long one would have to wait to get one, and how many bags are actually made each year.
More on Quran memorisation:
Mohammed bin Zayed Majlis
What sanctions would be reimposed?
Under ‘snapback’, measures imposed on Iran by the UN Security Council in six resolutions would be restored, including:
- An arms embargo
- A ban on uranium enrichment and reprocessing
- A ban on launches and other activities with ballistic missiles capable of delivering nuclear weapons, as well as ballistic missile technology transfer and technical assistance
- A targeted global asset freeze and travel ban on Iranian individuals and entities
- Authorisation for countries to inspect Iran Air Cargo and Islamic Republic of Iran Shipping Lines cargoes for banned goods
Thank You for Banking with Us
Director: Laila Abbas
Starring: Yasmine Al Massri, Clara Khoury, Kamel El Basha, Ashraf Barhoum
Rating: 4/5
Why are asylum seekers being housed in hotels?
The number of asylum applications in the UK has reached a new record high, driven by those illegally entering the country in small boats crossing the English Channel.
A total of 111,084 people applied for asylum in the UK in the year to June 2025, the highest number for any 12-month period since current records began in 2001.
Asylum seekers and their families can be housed in temporary accommodation while their claim is assessed.
The Home Office provides the accommodation, meaning asylum seekers cannot choose where they live.
When there is not enough housing, the Home Office can move people to hotels or large sites like former military bases.
The specs: 2018 Opel Mokka X
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Jetour T1 specs
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The biog
Favourite book: Animal Farm by George Orwell
Favourite music: Classical
Hobbies: Reading and writing
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
More from Neighbourhood Watch:
The smuggler
Eldarir had arrived at JFK in January 2020 with three suitcases, containing goods he valued at $300, when he was directed to a search area.
Officers found 41 gold artefacts among the bags, including amulets from a funerary set which prepared the deceased for the afterlife.
Also found was a cartouche of a Ptolemaic king on a relief that was originally part of a royal building or temple.
The largest single group of items found in Eldarir’s cases were 400 shabtis, or figurines.
Khouli conviction
Khouli smuggled items into the US by making false declarations to customs about the country of origin and value of the items.
According to Immigration and Customs Enforcement, he provided “false provenances which stated that [two] Egyptian antiquities were part of a collection assembled by Khouli's father in Israel in the 1960s” when in fact “Khouli acquired the Egyptian antiquities from other dealers”.
He was sentenced to one year of probation, six months of home confinement and 200 hours of community service in 2012 after admitting buying and smuggling Egyptian antiquities, including coffins, funerary boats and limestone figures.
For sale
A number of other items said to come from the collection of Ezeldeen Taha Eldarir are currently or recently for sale.
Their provenance is described in near identical terms as the British Museum shabti: bought from Salahaddin Sirmali, "authenticated and appraised" by Hossen Rashed, then imported to the US in 1948.
- An Egyptian Mummy mask dating from 700BC-30BC, is on offer for £11,807 ($15,275) online by a seller in Mexico
- A coffin lid dating back to 664BC-332BC was offered for sale by a Colorado-based art dealer, with a starting price of $65,000
- A shabti that was on sale through a Chicago-based coin dealer, dating from 1567BC-1085BC, is up for $1,950
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Tearful appearance
Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday.
Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow.
She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.
A spokesman said her upset demeanour was due to a personal matter.
