(E-Crypto News) Now Bitcoin has been thought of as the “gold” of the twenty first century. Many people have indicated that Bitcoin will replace gold in the financial markets while others thought vice-versa. William Cai, co-founder and partner at Wilshire Phoenix actually thinks that Bitcoin and gold actually complement each other. Here is what he had to say.
E-Crypto News: Many people say that Bitcoin is digital gold. What are your thoughts on this assertion?
Will Cai: “Digital gold” is just a metaphor that points to Bitcoin’s shared properties with gold. It does not mean it will replace gold or is ‘the better gold’. Investors can make better decisions by analyzing Bitcoin’s properties as an investment rather than relying on simplified descriptions.
E-Crypto News: How have cryptocurrencies changed investing portfolios and strategies?
Will Cai: Cryptoassets have not changed the principles of investing or trading. The space has introduced investors to new assets with low correlation to traditional assets and the potential for high returns. Cryptoassets give investors and traders more choices to construct their portfolios and/or trading strategies to achieve their financial objectives.
E-Crypto News: What should determine the relationship between Bitcoin, altcoins and gold?
Will Cai: All assets compete for investment. Bitcoin might compete against gold in some portfolios and altcoins might compete against Bitcoin in other portfolios.
E-Crypto News: Cryptocurrencies (including Bitcoin) have proven to be a hedge for many portfolios in times of uncertainty. What has been Gold’s relationship with the same?
Will Cai: We would argue that Bitcoin is currently more of a risky asset than a safe-haven asset. In times of extreme risk aversion, or “risk-off,” Bitcoin tends to suffer price declines as investors sell risky assets and move into safe-haven assets like gold.
E-Crypto News: As the world emerges from the COVID-19 pandemic, what are your thoughts on the response of the financial markets?
Will Cai: The massive coordinated monetary response around the world helped steady the financial markets during the pandemic. Now, timing the exit or tapering of these measures can be tricky. We could see market “temper tantrums” and market volatility as these exits or tapering measures are announced.