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Grayscale asserts Bitcoin is currently a technology asset, not a digital currency equivalent to gold.
The latest sell-off of the cryptocurrency appears to represent a retreat from growth, as indicated by the crypto asset management firm.
Grayscale asserts that bitcoin currently resembles technology stocks rather than gold. (Pixabay, modified by CoinDesk)
Key points:
- Grayscale noted that the recent decline in bitcoin parallels high-growth tech stocks, highlighting its current role as a growth asset.
- In the long run, the cryptocurrency’s limited supply and durability still support its potential as digital gold, although it has yet to achieve that status.
- Regulatory clarity and advancements in blockchain technology could pave the way for the next phase of recovery in the crypto market, according to the investment firm.
Bitcoin’s decline to approximately $60,000 earlier this month mirrored the experiences of tech investors rather than gold enthusiasts, as reported by crypto asset manager Grayscale on Monday.
As high-growth tech stocks faced a downturn, bitcoin’s value dropped in tandem, reinforcing the notion that, at present, the largest cryptocurrency behaves more like an emerging technology than a well-established store of value, according to the report.
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The structure of the cryptocurrency, its limited supply, autonomy from governmental control, and a robust, decentralized network, confer upon it the attributes of a long-term store of value. However, at merely 17 years in existence, bitcoin is still in the early stages of its monetary evolution, particularly when contrasted with gold’s extensive history spanning millennia, the firm contended.
“Bitcoin can be regarded as a long-term store of value: the network is anticipated to function well beyond our lifetimes and the asset may preserve its value in real terms,” stated analyst Zach Pandl.
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The cryptocurrency’s assertion of being digital gold has appeared increasingly tenuous in recent months. Instead of acting as a safe haven, it has sharply declined from its peaks, moving in alignment with risk assets as investors adopted a defensive posture.
Conversely, physical gold has surged to unprecedented heights, attracting investments just as bitcoin experienced capital withdrawals. This divergence has undermined the argument that the cryptocurrency consistently retains value during periods of market stress, indicating that scarcity alone has not yet enabled it to function like gold when protection is most needed.
Investing in bitcoin at this moment essentially represents a wager on its adoption, according to Pandl. Until bitcoin achieves broad acceptance as a global monetary asset, its price is likely to remain responsive to risk appetite, fluctuating in correlation with growth-focused portfolios rather than serving as a hedge in turbulent market conditions.
Recent market dynamics support this perspective. The report highlighted U.S.-driven selling pressure, outflows from spot bitcoin exchange-traded funds (ETFs), and significant deleveraging across crypto derivatives, all of which resemble a growth unwind rather than a crisis of confidence in the network itself.
Spot bitcoin ETFs have experienced a prolonged period of outflows, indicating a decline in institutional interest. In recent weeks, U.S.-based funds have lost hundreds of millions of dollars as investors have retreated amid market volatility and declining prices. These withdrawals have reduced total assets under management and left many positions in the red, emphasizing diminished demand for ETF-based bitcoin exposure while inflows in other areas of crypto persist.
Looking forward, Grayscale perceives the groundwork for a recovery taking shape beyond immediate price fluctuations. Regulatory advancements related to stablecoins and tokenized assets, coupled with ongoing innovation in blockchain infrastructure, may catalyze the next stage of adoption. Platforms like Ethereum and Solana, along with middleware such as Chainlink, are poised to gain from these developments, according to the firm.
The long-term challenge for bitcoin is still in progress. Concerns regarding scalability, transaction fees, and even quantum resistance remain significant. However, the report suggested that should the cryptocurrency navigate these challenges successfully, its volatility could decrease, correlations with equities might diminish, and its behavior could eventually align more closely with that of gold, albeit with a digital foundation.
Wall Street bank JPMorgan remarked that the cryptocurrency’s reduced volatility compared to gold could render it “more appealing” over the long term.
Read more: JPMorgan suggests bitcoin’s reduced volatility relative to gold might make it ‘more appealing’ in the long term
