Goldman Sachs: Bitcoin and Gold the Solution For Hyperinflation?

May 26, 2020

The cryptocurrency industry has long awaited positive attention from the mainstream financial markets and tomorrow, that wish comes true. Wall Street giant Goldman Sachs is hosting a call for clients on May 27 called “US Economic Outlook and Implications of Current Policies for Inflation, Gold, and Bitcoin.” The subject came to light amongst current fears of hyperinflation due to central banks printing money at alarming rates to “offset” the losses caused by the coronavirus economic crisis. Is this the big push crypto has wanted to open the doors for mainstream adoption?

Will Goldman Sachs go the way of JPMorgan to change its stance on cryptocurrency?

                  JPMorgan CEO Jamie Dimon famously change his stance on crypto

Some may remember when JPMorgan Chase, the investment firm once harshly critical of digital currencies, famously changed their stance in recent years. Jamie Dimon, JPMorgan CEO once said that cryptocurrencies are “not a real thing” only to come back around and release JPM Coin in February of 2019. Furthermore, the company recently announced the acceptance of two cryptocurrency exchanges, Coinbase and Gemini as new banking clients. Following this positive news, many people are eyeing Goldman Sach’s Bitcoin conference to be the latest evidence of bullish behavior from traditional institutions.

But what the sudden change of heart for these longstanding, powerful icons of Wall Street? Crypto enthusiasts always said cryptocurrency was the enemy of traditional, fiat-based institutions. It seems odd that JPMorgan, Visa, and now possibly Goldman Sachs are all coming around during an economic downturn. Or maybe it’s not odd. Maybe it makes perfect sense because these companies see something others do not see or are in denial of accepting. 

Traditional institutions losing faith in fiat

How Venezuela’s currency lost 90% of its value in 2 years

While Goldman Sachs has not discussed what exactly the contents of this client call will consist of, the title gives us some information. It’s no surprise that banks are concerned with the current state of affairs around the world. Central banks like the Federal Reserve in the US and the European Central Bank are printing money at rapid speeds to stimulate the economy. However, along with this comes new fears that fiat will quickly lose its value and catapult the world into a hyperinflation scenario. One much like Venezuela is going through now or what Germany infamously experienced in the 1930s. It’s quite possible Goldman Sachs is looking to explore new currency options like gold and Bitcoin as a hedging mechanism against hyperinflation.

Institutional investors have already explored cryptocurrency deeply this year. Grayscale Investment for example revealed that the large majority of its record-setting investment in Q1 of 2020 came from hedge funds and institutional investors. Most of these investments went into the Grayscale Bitcoin Trust (GBTC) citing an average weekly investment of $29.9 million in Q1. Rewind last year in Q1 of 2019 and that number was just $3.2 million. Furthermore, Grayscale CEO Barry Silbert even hinted that Q2 will yield even more impressive results. Given this data and several other red flags such as negative interest rates in the U.S. and Europe, record-setting recessions in places like India and overvalued stocks in the traditional market, it’s a safe assumption to say Goldman Sach’s call tomorrow will be bullish on Bitcoin. 

What is the role of crypto and gold in a hyperinflation scenario?

If this “disaster scenario” plays out and fiat currency becomes completely worthless, then it’s up to society to find a new currency they deem valuable. Right now, the top contenders for these alternative currencies are gold and cryptocurrency. Gold is a stable asset that holds its value very well in comparison to fiat currencies like the US Dollar or Euro. One large downside to gold is the physical nature of it. It’s not convenient to carry around large amounts of gold, use it as a payment method or send gold across borders.

Cryptocurrency, on the other hand, is a convenient, innovative, and efficient alternative to fiat currency that crosses borders seamlessly and cheaply. While leading cryptocurrencies like Bitcoin (BTC) are known for their volatility, there are other digital assets offering stable called “stablecoins.” Some stablecoins even combine the best of both cryptocurrency and gold such as Pax Gold (PAXG)*. People who buy PAXG get the benefit of owning real, physical gold but without the physical constraints.

Of course, the most obvious benefit of cryptocurrencies like Bitcoin is the limited supply. There is no central bank that can print more Bitcoin out of thin air. The supply is set at a certain number, preventing inflation from occurring in a way like fiat currency is now.

*To further earn on this digital gold, YouHodler even has PAXG savings accounts where users can earn 8.2% APY on PAXG and trade USD/Gold via the platform’s Multi HODL mechanism.

Is Goldman Sachs the catalyst for change backed by gold and Bitcoin?

Every negative event in history is a catalyst for change and amongst these events emerges new leaders to show us the light. It seems unexpected, but is Wall Street going to be the one to embrace cryptocurrency and bring us mainstream adoption as fiat collapses on the side? It’s probably not what Satoshi Nakamoto had in mind when he invented Bitcoin but that would certainly fit in with the technology’s unpredictable trademark. 

If this truly is the sign of a new future backed by digital gold and cryptocurrencies, then we should all be prepared. YouHodler’s ever-growing suite of crypto-backed lending solutions, wallets, crypto multiplication tools, and high-yield crypto savings accounts will equip you witj everything you need to build a strong digital portfolio. Don’t just sit by and wait for hyperinflation to occur. Instead, reach out to us at support@youhodler.com to see how you can stay ahead of the curve with smart, logical strategies. 


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