Home > News > Alternatives > Bitcoin Could Replace Gold as a Refuge, BlackRock Says
Alternatives

Bitcoin Could Replace Gold as a Refuge, BlackRock Says

The yellow metal now is in a funk, as the cryptocurrency keeps gaining.
By Larry Light


Bitcoin could supplant gold as the safe-haven store of value, according to BlackRock.

“Do I think it’s a durable mechanism that could take the place of gold to a large extent?” Rick Rieder, BlackRock’s CIO for fixed income, asked CNBC. “Yeah, I do, because it’s so much more functional than passing a bar of gold around.” Bitcoin, of course, is traded digitally.

As if to underscore his point, Bitcoin right now is gaining, while gold is losing. That’s a dynamic we haven’t seen in a while, as both the digital currency and the hard yellow metal have advanced in pandemic-ridden 2020. But gold stalled out at the end of July, and has since lost 9%. During that same period, Bitcoin has gained 65%.

Yes, there are big differences in overall value, with Bitcoin at around $300 billion market capitalization, about 3% of gold’s estimated value, by the measure of CoinShares, which brokers investments in the virtual money. Bitcoin has been around for a few years, gold for a few millenniums.

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The virtual currency is “here to stay” due to greater acceptance among mainstream Wall Streeters and popularity among Millennials, said Rieder, whose company is the world’s largest asset manager. Investors increasingly see Bitcoin as a viable alternative to government-supported currencies, and its semi-outlaw image has helped its cache.

Bitcoin’s acceptance among key figures in the financial firmament has sped along its fortunes in the marketplace, argued Van Eck Securities, in a research paper, Indeed, the virtual currency has won over Yale’s endowment, JPMorgan (JPM), Fidelity Investments, the California Public Employees’ Retirement System (CalPERS), and Guggenheim Partners, along with Wall Street legends such as Paul Tudor Jones and Stanley Druckenmiller.

Meanwhile, family offices are dumping their gold and shunting money into Bitcoin, JPM reported. During November, the bank found, gold funds shed 93 tons of the metal. And Grayscale Bitcoin Trust, a favorite for institutions investing in Bitcoin, doubled in value over the past three months.

Certainly, gold has more disadvantages compared with Bitcoin, ones that far exceed the weighty bullion’s lack of easy portability. (A gold bar weighs 28 pounds, and one Bitcoin weighs zero.) Numerous analysts have pointed out that good news about vaccines has hurt gold, whose price tends to thrive when dark economic clouds are gathering. At the same time speculative fever has seized Bitcoin.

Long-term trends are no guide to the current gold-Bitcoin dynamic. The dropping dollar has until recently been a help to both gold, which historically is inversely correlated to the greenback, and Bitcoin, the antithesis of a government fiat denomination.

Then gold began to slide, along with the buck. But the cryptocurrency has stayed aloft. Nonetheless, it’s wise to bear in mind that Bitcoin is known for its extraordinary volatility, so today’s rally could lead to disappointment up ahead.

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Home > News > Regulation > How Carbon Pricing Could Get a Boost in Biden’s Washington
Regulation

How Carbon Pricing Could Get a Boost in Biden’s Washington

Sustainability advocates argue that financial markets are not properly pricing in climate risk. That could change as Democrats take over the executive branch.
By Sarah Min


Calls for carbon pricing policy measures are stronger in Washington than ever before, as the federal government continues to transition to the Biden administration. 

Sustainability advocates say a carbon pricing policy that aims to lower global warming emissions would transform the capital markets and expand the conversation on climate change for investors beyond fossil fuels and the energy sector, according to a Tuesday webinar from the New York Times Climate Hub. Under carbon pricing, carbon emitters are charged a fee that is meant to induce them to lower their levels of pollution.

President-elect Joe Biden has voiced some support for a carbon levy in the past, although his position on the subject is not strong.

“Right now, carbon pollution, of which it costs society billions and billions of dollars a year, is priced in most places at zero. When something’s free, we get more of it—until we put a price on carbon,” Mindy Lubber, chief executive and president at sustainability advocacy group CERES, said on the panel. 

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“Now, that’s not going to stop everybody, but capital market systems, of which financial players are part of, work well with honest pricing signals, and when you have dishonest pricing signals, they don’t work so well. So, we can’t transform the financial system without looking at those kinds of policy issues,” Lubber continued.  

In the past year, asset owners have increasingly made commitments to sustainability, while enacting efforts to push managers and companies toward net zero policies. But climate advocates hope that increasing regulatory interest in climate change will signal broader changes in the financial sector. 

“If there were ever a time where we have a shot at some change, literally the kind of transformative financial sector change that your session is about, I think now is that time,” Lubber said during the webinar.  

Last month, Federal Reserve Chair Jerome Powell said the regulator is in the early stages of working climate change into financial regulation. Meanwhile, Biden’s candidate for Treasury secretary, Janet Yellen, has been outspoken about her support for a carbon tax. 

Yellen, a former Federal Reserve chair, has put forth a proposal with the Climate Leadership Council that would cut carbon emissions in half by 2035 with a tax starting at $40 per metric ton. 

In an October interview with Reuters, the former Federal Reserve chief said, “I do see Republican support, and not only Democrat support, for an approach that would involve a carbon tax with redistribution. It’s not politically impossible.” 

Still, critics argue that a carbon tax would harm poorer households that have to spend more of their income on gasoline. Proponents have argued that part of the funds raised by the tax could return to the public in the form of dividends. 

According to the World Bank, 46 countries around the world currently have a carbon pricing policy. 

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