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Will Bitcoin Replace Gold?

With the growth of bitcoins market capitalization to roughly $300 billion at the moment from $9 billion at the start of the year, this has led to a heated debate if it’s a bubble or can it actually threaten Gold’s supremacy as the trust-less store of value instrument.  The two have some similarities; both of them need to be mined to be acquired. They are both scarce due to their structural scarcity. Importantly, they both derive asset values than are not directly controlled by the central banks. They cannot be printed by the central banks and not involved in the fractal banking system.

However, regardless of these strong similarities, currently Bitcoin has exhibited too much volatility to be used as a reserve asset for the long term. In December Bitcoin attained its peak of $20,000 and fell, settling at around $15,000. Its volatility is not only tied to its market fluctuation, but due to the availability of competitors  with at the moment cryptocurrencies are in excess of 1300 with this it still remains as a bet since its certainty of being the last standing is not yet proven. Also it is only nine years old, it has a long way to go.

Gold, on the other hand, it’s tangible and has a five thousand year history with a reputation cemented having survived the great depressions experienced in the world. Its market trajectory is also seen to be on the rise due to its current availability. A current report suggests that Gold ores a on the decline with various producing countries confirming the report such as South Africa.

Regardless of the attention that Bitcoin is receiving at the moment, Gold is mostly preferred as an alternative for fiat currencies at the moment and maybe in the far future.  The debate of gold versus bitcoin, will only increase in its intensity over the coming years

 

About the author

Jason Manolopoulos co-founded Dromeus Capital Group in April 2008 and is the co-CIO of the firm. Jason leads the firm's investment activities is a member of the Firm's Executive and...

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