Crypto Taking Gold Investors Says Analyst – Trustnodes

Some gold investors are going to crypto according to Axel Merk, President and Chief Investment Officer of Merk Investments.

They recently launched the VanEck Merk Gold Trust (OUNZ) which lets investors take actual delivery of gold.

In discussions regarding that gold market, Merk said some investors had gone to crypto, stating:

“As far as the gold investor is concerned, I group them into three different buckets. One is the investor concerned about the erosion of the purchasing power of the dollar. The second one is the diversification investor, and the third one is the trend follower.

The trend follower, they love a trend, when the price of gold moves, they’ll jump on board. Those investors mostly went to the meme stocks and other things, cryptocurrency and whatnot. We’ve seen those not as much around.”

Bitcoin and the Dollar Strength Index (DXY) have been correlating significantly which can allow bitcoin to perform that “purchasing power” role too.

In addition, the asset is usually uncorrelated, making it a useful addition as a diversifier, but as a gold ETF manager, naturally Merk would say they’re all speculators that have gone to bitcoin and apparently this is good for gold. Merk says:

“The investor, the group that has moved from gold to digital assets, was the speculator, right? So, if anything, the impact had been that the volatility in gold has been less than it might have otherwise been because during the boom phase and the digital asset phase, those investors on steroids have other avenues to play out.

And yes, it might have meant that the price of gold could have gone up higher, but also be more volatile and then plunge down more. And so in both directions, it has had an impact.”

What matters when there is volatility is the floor and bitcoin’s floor so far has been higher than previous downturns, making that volatility be generally in an upwards direction.

In addition, there is no way for Merk to know whether those that left gold for bitcoin are speculators or otherwise as he does not cite any survey or provide any evidence for his claim.

However, he does admit that they have left, bitcoin “has had an impact,” and as an ETF manager he probably has data in that regard.

But gold does still have the central banks reserves market, which bitcoin has not yet touched as far as it is known, and as long as that remains the case, crypto is not a real threat.

If that changes, and there are reasons for central banks to also hold bitcoin in addition to gold, then we may move towards a flippening in market cap.

Gold’s main advantage against bitcoin is that the elderly in charge of these decisions are familiar with it, and that it’s a physical commodity.

Its physical nature however is also its main disadvantage. It’s almost impossible to pay with gold online without an intermediary which may inflate that gold as it pleases, and it is difficult to pay with it offline too.

Bitcoin therefore has greater utility while largely performing all the functions of gold, which is why the crypto market has attracted many gold investors.