Bitcoin unlikely to replace gold as a safe haven, says UK analyst

BITCOIN, also known as “digital gold”, was unlikely to replace gold as a safe haven despite the cryptocurrency’s popularity and blazing gains since the beginning of this year, according to analysts.

Neil Wilson, a senior market analyst at London-based ETX Capital, said yesterday that he did not even think Bitcoin was cannibalising gold demand as some suggest.

“In fact, you see gold is up $100 this year,” he said.

Wilson viewed bitcoin as a speculative bubble based on people assuming it would keep rising, and there were many reasons why its appreciation could not last.

“Gold remains the safe haven of choice for investors. Bitcoin would have to become considerably less volatile and, as such, a far better store of value for it to affect interest in gold.

“It’s also open to fraud and hacking, which makes it less than secure. And most investors don’t particularly want a decentralised, unregulated network to be their safe haven. They want something tangible and understood and that is gold,” Wilson said.

Bitcoin is a leading virtual currency in terms of value and volume with some 30 million people worldwide owning bitcoin.

It soared this year with the price jumping to more than $10 000 at the end of November from $952 (R11 965) a token at the beginning of the year.

Peter Major, head of mining at Cadiz Corporate Solutions, said the impact of bitcoin on gold could not be quantified.

“Bitcoin has had an effect on gold (but) we do not know by how much. It is viewed as a great alternative to gold. The growth of bitcoin is not good for gold because it is a distraction for investors and is taking money away from gold,” he said.

A new study from Juniper Research has found the value of cryptocurrency transactions were expected to surpass $1 trillion this year, more than 15 times the level last year.

Ashburton Investment research analyst Sthembele Bophela said yesterday that the implementation of efficient regulation, whether for or against cryptocurrency, was essential.

Bophela added that although various countries had promoted, and for now still permitted the use of Bitcoin, others including Bangladesh, Bolivia, Ecuador and Kyrgyzstan, had declared an outright ban of the currencies and the exchange platforms.

In November 2013, the People’s Bank of China proclaimed that Bitcoin would never be endorsed as legitimate currency in China.