“Concerns of bitcoin theft were rampant a few years ago,” Jim Wiederhold, associate director for commodities and real assets for S&P Dow Jones Indices, said in excerpts of the report emailed by a press representative for the New York-based company. “As bitcoin becomes more mainstream, these worries are fading, though lingering technology and exchange counterparts risks remain.”
S&P joins a growing list of Wall Street firms to weigh in on bitcoin after prices for the cryptocurrency quadrupled in 2020, generating fresh interest among big institutional investors including BlackRock, the world’s biggest money manager.
Some highlights from the S&P report:
- Is bitcoin the new gold? the report reads. Recently, the parallels between the two assets have grown.
- Both bitcoin and gold are viewed as scarce, have the potential to be held outside of conventional financial markets, and have values that cannot be inflated away by relentless money creation and currency debasement. Gold and bitcoin are also uncorrelated to other popular asset classes in portfolios, which provides evidence of their diversification benefits.
- The fundamentals of bitcoin and gold differentiate in owning one versus the other. Gold is a physical asset while bitcoin is a digital one. While both are scarce, gold does not yet have a ceiling to supply, while there ultimately can only be 21 million Bitcoins mined.
Bitcoin prices have a one-year volatility of 82%, multiples of the 15% seen in gold prices and the 26% volatility shown by the S&P 500 Index of large U.S. stocks, according to the report.
The report comes as S&P itself is angling to get into the crypto market. The firm announced last month a partnership with data provider Lukka to launch crypto indexes in 2021.
