Is Bitcoin finally more credible than Gold now?
According to recent research by Fidelity, one of the world’s biggest financial services company, Bitcoin’s demand has been growing. And at no small rate either, since the demand for Bitcoin has been as high as it was for mobile phones.
How so? Well, there’s an urgent need for an alternative asset since global debt is exploding to new levels. An asset other than the U.S dollar is needed to beat the growing inflation.
In the past, Gold has been that asset. Even after the gold standard was dropped, Gold being a good inflation hedge, kept up with the market.
And now, it looks like Bitcoin could be joining that brigade too. Bitcoin’s market cap, combined with Gold’s, represents about 59% of the money supply today.
Additionally, when Bitcoin’s price is compared to Gold’s path since the gold standard was dropped, it looks like BTC has been moving in quite a similar manner. This, in a way, shows us where Bitcoin’s price could be heading in the future.
Now, by and large, Bitcoin’s markets have seen investors’ participation increase with time. However, there have been instances that have impacted negatively as well.
Due to sellers buying in at tops and selling at dips, holding time has come down for Bitcoin as young coins are sold off quickly.
However, most HODLers remain undeterred since their numbers have been growing despite all the volatility in price action.
Plus, another reason for BTC’s demand increasing is the movement of the Dollar index.
It is falling at a time when the likes of Gold and Bitcoin are rising. Thus, it is increasingly becoming apparent what people would want to choose.
Ergo, in light of the aforementioned demand and supply dynamic, $1 million by 2026 is well within the realm of possibility.
Popular analyst Mark Moss was one to give his opinion on the Bitcoin and Gold v.
U.S Dollar discussion too. According to him, “This would mean USD is as worthless as the Zimbabwe note”
On the contrary, other big names like Ray Dalio, Former co-CEO of Bridgewater Associates, still stands with Gold.
“If you put a gun to my head, and you said, ‘I can only have one, I would choose gold.”
Needless to say, what you invest in is subjective to your opinion.
This narrative is perhaps as old as the cryptocurrency itself. In fact, comparisons between Bitcoin and Gold have continued through the bull and bear cycles of the past year too.
That being said, however, the fundamentals have also changed significantly since.
Bitcoin, unlike in 2017, is promoting consistent stability in the market, breaking away from its dependence on the larger financial market.
In this article, we will be looking at a hypothetical investment strategy between Gold and Bitcoin to evaluate BTC’s current market standing.
According to data from Skew, the BitcoinGold realized correlation had dropped down to its all-time low value at press time. This highlighted the divergences between the digital asset and the valuable commodity.
Here, it is important to note that particular statement since Gold has a larger market cap than Bitcoin.
Additionally, the realized volatility between
BTC and Gold appeared to be declining - A sign of reduced turbulence for the digital asset. Hence, the likelihood of another massive breakdown is probably low for the crypto.
Yet, Gold is a safe long-term bet, right?
The common go-to argument has always been the fact Gold has intrinsic value and Bitcoin does not.
Gold incorporates consistent returns in value and investors do not have to worry about BTC’s turbulent market, others say.
Now, in order to identify whether investing in Gold or Bitcoin is more fruitful, we set out a parameter test for Bitcoin, Gold, and the Dow Jones. One where we tried to identify ROIs on monthly investment or Dollar Cost Averaging.
(Note: It is widely known that BTC has had an obvious edge over Gold this year - Even so, the inferences to be discussed here are different)
The framework of the hypothetical test is as follows,
Investment of $1000 in Bitcoin, Gold, and DJI Buying is limited to once every month The timeline is from September 2020-August 2021
According to data, a total investment of $12,000 in Bitcoin over a period of 1 year would have incurred a 66.33% profit, reaching $19,960 at the end of August 2021.
The correlation index was fairly high during the rally in January and May, but over the past couple of months, BTC’s recovery has had nothing to do with Gold.
Now, Gold is definitely not expected to match BTC’s returns, but it gets interesting.
A similar investment in Gold would have led to a 2.60% decline as the investment value would have gone down to $11,687. Investment in DJI would have incurred profitable returns as well, with 12.37% returns worth $13,484 over the year.
Hence, Gold hasn’t really been the best form of asset over the past year, no matter its past credentials.
As stated in the beginning, the fundamentals are changing, and Bitcoin may be rapidly eating into Gold’s market.