ETH can overtake BTC to become the main digital store of value, Goldman Sachs says

on Jul 7, 2021
  • According to the bank, ETH has an advantage over BTC because it has more real-life use cases.
  • The investment bank believes that cryptos have a long way to go before they can edge gold out.
  • Goldman Sachs says the competition among cryptos prevents them from becoming safe-haven assets.

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American investment bank Goldman Sachs has become the latest organisation to give Ethereum (ETH/USD) a vote of confidence. The bank believes ETH’s real-life use cases might see it topple Bitcoin (BTC) to become the leading digital store of value in the next few years. This prediction is based on the fact that the Ethereum blockchain is the most popular smart contract platform for smart contracts.

According to a research note from the investment bank, BTC has become a strong brand because it was the first cryptocurrency. Per Goldman Sachs, the BTC network is slow, seeing as it can only process seven transactions in a second. Due to this pain point, the cryptocurrency lacks some of the crucial real-life use cases that ETH offers.

The bank’s outlook on both currencies comes amid a bear market that saw BTC/USD plunge from its ATH of $64,863.10 (£46,967.70) to trade at $34,817.15 (£25,210.92) at the time of writing. Like BTC, ETH/USD is down 45.32% from its ATH of $4,362.35 (£3,158.49) and is currently changing hands at $2,384.66 (£1726,58) after gaining 1.67% over the last 24 hours and 12.55% over the past seven days.

The gains in ETH are triggered by the upcoming London EIP-1559 hard fork, which might take place as early as August 4.

Gold still reigns supreme

Nonetheless, the bank believes that in as much as ETH might overtake BTC to become the preferred digital store of value, both cryptocurrencies will take a long time before they can topple gold. According to Goldman Sachs, the volatility of cryptocurrencies puts them at a direct disadvantage against gold, which is a safe-haven asset.

The bank added that the scope of gold’s competition against crypto is the same as that of its competition against other risky assets, such as equities and cyclical commodities. While the bank believes both gold and crypto can help hedge against inflation, it said gold is a defensive inflation hedge while crypto is a risk-on inflation hedge.

Goldman Sachs also believes that the competition among cryptocurrencies also sets the entire sector back, seeing as investors doubt whether it is a safe asset class. To this end, the bank believes cryptocurrencies cannot become safe-haven assets at the moment.