Goldman Sachs: Ethereum May Surpass Bitcoin as Store of Value, But Not Gold

In a note to investors on Tuesday, Goldman Sachs outlined its reasoning behind the claim that Ethereum will eventually become a better store of value than Bitcoin.

According to the note, the investment bank believes Ethereum currently looks like the cryptocurrency with the highest real use potential. It added that it is the most popular development platform for smart contract applications, according to reports.

Bitcoin may have the stronger brand given its first-mover advantage, it added, however, BTC lacks some of the often-cited real use cases of Ethereum. This is partly due to its slow transaction speeds of just 7 transactions per second. Ethereum in its current native state is not much quicker, however, with around 15-20 transactions per second.

Goldman Big on Gold … and Ethereum

The bank did state that neither crypto asset can compare with gold as a store of value, arguing that its high volatility does not make them comparable.

“Gold is competing with crypto to the same extent it is competing with other risky assets such as equities and cyclical commodities. We view gold as a defensive inflation hedge and crypto as a risk-on inflation hedge,”

What it did not compare, however, were the gains between the two. So far this year, gold has declined 5.4% whereas Ethereum has made over 215% to current levels – and that is including a 46% correction.

Goldman added that the competition between different crypto assets is also preventing them from becoming safe-haven assets at this stage.

Big Bank Flip-flops

The banking giant has flip-flopped on crypto assets and even gold recently with a report in June contradicting its current findings.

“The argument that Bitcoin and cryptocurrencies are a digital version of gold does not confer any value to Bitcoin and other cryptocurrencies, because gold itself is not a consistent or reliable store of value,”

The Goldman Sachs Investment Strategy Group should sign off its research pieces on crypto with “Have Fun Staying Poor”. pic.twitter.com/TiedRBxWhI

— Alex Krüger (@krugermacro) June 14, 2021

There are obvious divisions within the bank about its approach to cryptocurrency. In May, Goldman Sachs led a $15 million investment round for blockchain analytics firm Coin Metrics.

In April the bank added Bitcoin to its year-to-date returns report, and in March, Goldman filed for a Bitcoin ETF with the SEC according to crypto custody firm New York Digital Investment Group (NYDIG).