Bitcoin can’t match gold as inflation hedge: Morgan Stanley

Bitcoin is better than gold and is probably even better than conventional fiat currencies as a medium of exchange.

But the popular view that this immature currency is also superior to gold as a hedge against inflation and uncertainty still needs to be tested, according to Morgan Stanley.

“Some claim that the protocol limiting bitcoin’s supply growth rate, underpins its value,” says Morgan Stanley equity strategist Tom Price.

“But if bitcoin is successful long term, we should continue to see competitor cryptocurrencies and market strategies emerge to exploit the new economic rent — a bearish risk for bitcoin’s price.”

And while gold has demonstrated over millennia its ability to endure and preserve value under all circumstances, bitcoin’s global platform literally requires the lights to stay on.

Mr Price notes that gold’s value to financial markets has already been incrementally marginalised by the rise of trade-/productivity-backed fiat money.

He sees Bitcoin as “the latest money to offer gold’s longstanding capabilities plus some other unique benefits.”

“While it too may somehow undermine gold’s demand outlook, the rate/scale of the shift depends on the willingness of investors to engage bitcoin/cryptocurrencies,” he says.

“And willingness first requires a time-consuming, trust-building exercise.”

Others disagree however, with Blockchain Capital analyst Spencer Bogart declaring, “If we think about the qualities that make gold a respected ‘money’ or store of value, bitcoin is actually superior in many regards.

“[But] gold has something very important that bitcoin lacks: a more than 1,000-year history of being a decent store of value. This is very important for trust and people’s willingness to store value in that particular asset.”

Bitcoin has lifted its value by about five times since November 2016, with its current price sitting around $US4000.

The ‘cryptocurrency’ is a stateless, digital currency launched in 2009, which trades 24-hours a day and during weekends.

Bitcoin operates across a network of independent by linked computers, and uses the ‘blockchain’ to verify transactions, eliminating the need for a central party like a government.

The currency has grappled with internal tumult however, recently splitting into two — bitcoin and bitcoin cash.

Bitcoin’s new offspring is designed for fast and cheap transactions, as opposed to bitcoin, which has grown in popularity despite limits on how rapidly it can trade.

Bitcoin Cash was announced as a project on July 22, following a two-year-old impasse over a technical issue: how to best expand network capacity.

In the last couple of weeks the price Bitcoin Cash has mostly hovered between $US250 and $US300.