Many cryptocurrency investors believe that Bitcoin has a value storage function that can be used to hedge against inflation and is a safe haven in times of stress, just like gold. But analysts at Goldman Sachs, led by Jeffrey Currie, said in a report on Wednesday that Bitcoin's status as a defensive asset was far from certain. They point out that Bitcoin has recently stagnated at a time when global COVID-19 cases have soared again, leading investors to seek defensive assets.

Environmental problems, lack of practical use and competition from other cryptocurrencies such as Ethernet coins mean it is too early to see Bitcoin as digital gold, analysts at Goldman Sachs said in a report.

Goldman Sachs says one problem with Bitcoin is that investors are indecisive because it consumes a lot of energy in the process of digital mining. Research from the University of Cambridge shows that Bitcoin mining consumes more energy each year than the entire country of Argentina. Many supporters of Bitcoin refute concerns about its energy use, arguing that mining is increasingly using renewable energy.

Analysts at Goldman Sachs also point out that Bitcoin has given way to other cryptocurrencies such as ethercoin and alternative coins. This competition, they say, increases the risk of owning bitcoin. The bank also said that Bitcoin had no practical use, undermining its attractiveness as a defensive asset. Analysts at Goldman Sachs say traditional long-term stores of value, such as gold, art, diamonds, wine and collectibles, have value and use in addition to being a store of value. Practical use is important because it balances price fluctuations, because actual demand adjusts to absorb fluctuations in investment demand. It also means that the value of assets is unlikely to be zero.

Bitcoin has no practical use, its environmental score is low, and it is easy to lose the need for value storage to another better designed cryptocurrency. As a result, Goldman Sachs believes that it is too early for Bitcoin and gold to compete for safe haven demand, and the two can co-exist.

Goldman recently reopened its cryptocurrency trading division despite questioning the use of bitcoin. It is one of many large institutions attracted by the soaring price of cryptocurrency.

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