A 36-year market veteran explains why bitcoin won't replace gold and how today's crypto hype is like the dot com crash — 'If enough people think that it's really easy to make money, then what's in trouble is your money.'

• The boom in crypto shouldn’t dissuade investors from owning traditional assets like gold, Societe Generale’s Kit Juckes said. 
• Finding intrinsic value in cryptocurrencies is difficult, as evidenced by last week’s volatility. 
• Despite the dramatic swings, even major institutional players are giving their customers exposure to cryptocurrencies due to customer appetite.
• See more stories on Insider’s business page.

All that glitters is not as valuable as gold, and not all stores of value are created equal, despite what bitcoin’s legions of fans might have you believe, according to investing veteran Kit Juckes. 

“The idea that anything magically replaces [gold] as an intuitive storer of value on day one, I think is super optimistic,” Juckes, who is Societe Generale’s chief global FX strategist, told Insider.

“Money is based on confidence and trust, and I don’t think you can invent a token today and have it catch up with thousands of years of built up trust [in gold],” Juckes added.

Bitcoin has grabbed the headlines this year thanks to its impressive gains, having risen by more than 300% in the space of 12 months, as investors – both professional and amateur – have snapped up cryptocurrencies. Some of Wall Street’s biggest financial institutions are starting to offer their clients exposure to crypto and some even say it could rival gold as a hedge against inflation.

With decades of strategic investing experience behind him, Juckes has any number of anecdotes about the markets. But there’s something about the crypto-craze that reminded him of another market mania 20 years ago. 

“I remember being on a train from Boston back to New York during the dot com bubble,” he said. “Because there was a snowstorm in Boston, I couldn’t catch a flight and then someone sitting there said he’d given up being a dentist because he was investing in the dot com stuff, as if any idiot can make 20% per annum out of this stuff. It’s just so much better than being a dentist,” he said.

“To me, it’s a completely separate question from whether an investment is a good or a bad investment. If enough people think that it’s really easy to make money, then what’s in trouble is [your] money,” he said.

Market turbulence

Last week’s installment of dramatic swings for cryptocurrencies came as the People’s Bank of China announced digital tokens would not be permitted as a form of payment by financial institutions.

Bitcoin plunged as much as 30% to nearly $30,000 during the wild ride. It spurred on other major crypto sell offs, including ether, the digital currency behind the Ethereum blockchain, which was down more than 26%, hovering around $2,500. Dogecoin, which has benefitted from the famous backing of Elon Musk and other celebrities, also fell around 25% to about 35 cents. 

In a recent research note, Societe Generale analysts said bitcoin has clearly “outshone” gold both to the upside and now also to the downside. Gold has gained around 9% in the last year.

The analysts also said investors see cryptocurrencies as a way to protect against a decline in the value of fiat currencies given the unprecedented amount of monetary and fiscal stimulus in the financial system.

But there are drawbacks. “Without a yield of their own, the only potential reward to investors in Bitcoin and gold is from their positive price movement, which is essentially the only thing they have in common, apart from their ability to trigger rush buying,” SocGen said.

Juckes himself isn’t a full-on bitcoin-believer either. 

“If one of my children came to me and said, ‘do you mind if I buy some?’ I would advise them to spend an awfully long time researching it before coming back and asking for permission again,” he said with a laugh.

Still, the allure of becoming an overnight millionaire through crypto is enticing others to go all-in. Consider Glauber Contessoto, 33, who told CNBC’s Make It that he became a millionaire through dogecoin after investing his savings of $250,000 into the currency when it was priced at about 4.5 cents in early February.

Despite such success stories, the hype around digital currencies have also led investors to warn that their volatility means you should only invest money that you’re prepared to lose.

Big players move in

The recent plunge has revealed another clear truth: institutional money has moved in.

The market capitalization for the entire digital currency space was $1.35 trillion last Wednesday, below its recent peak of $2.56 trillion on May 12, according to CoinMarketCap.com. 

“Wednesday’s crypto plunge might have been curtailed by the fact that there are institutional players in the market this time, compared to the 2018 crash,” Eloisa Marchesoni, a cryptocurrency expert, said.

“However, such a considerable crash seems to have spooked some institutional investors who are now exiting their Bitcoin positions favoring gold, whose price is relatively more stable.”

Regardless of last week’s volatility in the crypto space, an ever-increasing list of prominent banks are getting involved, including Morgan Stanley, which is offering bitcoin funds for its high net worth wealth management clients.

JPMorgan has also launched debt products that are linked to the performance of a basket of companies with exposure to cryptocurrencies, which allows investors to have indirect exposure to this market.

Private banks that are going to be “nervous of losing business to people putting their money in bitcoin will be getting involved in that industry if that’s what their clients want,” Juckes said.

Get the latest Gold price here.

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