Bank of Singapore’s Chief Economist Says Cryptocurrencies Could Edge Out Gold
But certain risks, such as trust, volatility, and regulatory clarity, need to be addressed first.
The Bank of Singapore is the latest institution to favor cryptocurrencies in its push to usurp gold. Optimism over the asset class is high, with the industry showing signs of more growth.
While Bitcoin and several other large-cap cryptos appear to be on the upsurge again, sentiment about the crypto market is gaining momentum.
However, many are still hung up on the leading cryptocurrency’s recent performance, and talks of the asset usurping gold as the global reserve currency have continued.
No Way Over Fiat, but Time’s Up for Gold
The latest body to weigh in on the prospect of Bitcoin overtaking gold is the Bank of Singapore. According to a report from The National news, the bank recently published a research note where it touted cryptocurrencies as a possible replacement for gold down the line.
In the report, the Bank of Singapore argues that cryptocurrencies are unlikely to replace fiat currencies – practically pouring cold water on the hopes of those who are touting the digital yuan and other Central Bank Digital Currencies (CBDCs).
Mansoor Mohi-uddin, the bank’s chief economist, explained that cryptocurrencies are an inefficient unit of exchange, and central banks won’t be able to print them at will in times of crisis. However, he also explained that digital assets are more likely to become the major safe-haven asset. With the market showing significant potential over the past few years, there is every reason to believe that cryptocurrencies could easily overtake gold.
To do this, the bank believes that cryptocurrencies will need to overcome some hurdles. For one, it pointed out the need for trusted institutions that will provide custody for investors. Many cryptocurrencies would also need to be more liquid, allowing high levels of trading and other activities to take place. Improved liquidity will also reduce volatility, a problem that the crypto industry has had for years.
Everyone Loves Crypto
The Bank of Singapore isn’t the only institution pumping Bitcoin to overtake gold eventually. In a recent opinion piece, Anthony Scaramucci and Brett Messing, two executives at New York-based hedge fund SkyBridge Capital, explained that Bitcoin is ripe for investment as its ownership is now as safe as gold and government bonds.
SkyBridge Capital filed with the Securities and Exchange Commission to launch its Bitcoin fund last December. When the fund launched fully earlier this month, the New York firm claimed that it had as much as $310 million in exposure to the leading cryptocurrency.
Investment banking giant JP Morgan has also touted Bitcoin’s chances of taking up more of gold's market share. In an investment note, the company’s strategists said:
“The adoption of bitcoin by institutional investors has only begun, while for gold, its adoption by institutional investors is very advanced. If this medium to longer-term thesis proves right, the price of gold would suffer from a structural headwind over the coming years.”
Institutional investment is sure to push Bitcoin and the entire crypto market even higher. With government regulation expected soon, the future definitely looks bright for this fledgling market.