Why Bitcoin and gold can have a place in portfolios

Gold regarded as safe haven, while Bitcoin has potential for substantial gains: Experts

- Chor Khieng Yuit Senior Business Correspondent

Comments from US Federal Reserve chairman Jerome Powell that Bitcoin is "just like gold" have brought renewed focus on whether cryptocurrencies can be a sound investment.

Mr Powell said: "People use Bitcoin as a speculative asset. It is highly volatile. It is not a competitor for the dollar. It is really a competitor for gold."

Those remarks certainly raised eyebrows, especially as the US is the largest holder of gold in the world.

Mr Robin Tsui, gold strategist for the Asia-Pacific region at State Street Global Advisors, said the Fed holds about 75 per cent of its reserves in the yellow metal.

Donald Trump added to the crypto mania when he launched his own cryptocurrency, $Trump, on Jan 17. The official Trump token rose as high as US$73.43 on Jan 19 after hitting a low of US$4.29 on Jan 18, according to CoinGecko, an industry data tracker.

Currently, one $Trump coin is worth around US$60, bringing the total market capitalisation of the 200 million tokens in circulation to nearly US$12 billion (S$16.4 billion).

To be sure, Bitcoin and gold do share some similarities, said Mr Kevin Teng, chief executive of WRISE Private Singapore, and this has drawn frequent comparisons of the two asset classes as investments.

Both are limited in supply, which has raised their perceived value as a hedge against inflation, he added.

There will be only 21 million bitcoins in total, with industry estimates indicating that 19.8 million coins are already in circulation, and 1.2 million coins - about 6 per cent - are left to be created.

As for gold, the World Gold Council (WGC) estimates that around 212,582 tonnes of gold had been mined as at the end of 2023, while proven reserves of around 59,000 tonnes of gold remain underground.

Investors have taken note, with both asset classes enjoying a good outing in 2024.