There is a fierce debate dividing people: is Bitcoin the new gold?
During turbulent times such as a hurricane or North Korea’s nuclear threats, we have seen money shifting to safe haven assets such as Bitcoin and gold. Of course, Bitcoin investors swear by the fact that the cryptocurrency has more upside.
But gold is demonstrating a little more stability.On Friday, Gold prices traded at one-year high on, helped by a broadly weaker U.S. dollar and lingering concerns over North Korea tensions with the rest of the world.
On the other hand, Bitcoin fell after of Chinese regulators imposed a ban on individuals and businesses from raising funds through initial coin offerings (ICOs). On Tuesday, Bitcoin’s valuation fell another 2% after JPMorgan (JPM) CEO slammed Bitcoin as “worse than tulip bulbs” at the 7th Annual Delivering Alpha Conference.
Both media and investment professionals have mixed views on the rising popularity of Bitcoin, but despite conflicting views, Bitcoin has become impossible to ignore and is behaving in a similar way to the metal of Midas. There are a number of reasons behind this.
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“The upshot of this is that as a property, Bitcoin has begun to behave in a way that is similar to gold,” said Nolan Bauerle, director of research at CoinDesk. “For example, the macroeconomic forces at play during Brexit saw money move to safe havens like Gold… and Bitcoin.”
Bauerle explains the recent political triggers such as the friction between Japan and Korea have led prices at global exchanges in lockstep with North Korea’s unpredictability. “In Japan’s case, quantitative easing has also driven consumers to Bitcoin in the same way that gold may have benefited in a previous time.” Bauerle said.
There is another key similarity between the two assets in the creation of new supply: gold and Bitcion are both mined and require work to extract or create.
“These similarities only speak to inherent qualities of both gold — in this case, more like bullion – and Bitcoin,” Bauerle said. “The ‘applied’ qualities — in the case of gold that means jewelry or coins and in the case of Bitcoin, the dexterity of its protocol — is where the gold-Bitcoin comparison ends.”
He explains that, in short, Bitcoin solves important problems related to forming and securing relationships in the digital world. In particular with digital authentication — for example the recent Equifax hack and authorizations – Bitcoin can behave according to the rules set forth in a contract.
Bauerle adds that before Bitcoin, “digital” was not synonymous with scarcity. Anything digital could be copied with the click of a button. Bitcoin is doing something new. The cryptocurrency has introduced a “uncopyable” digital code. So, for the first time since bits and bytes were invented, there was a way to own something digital that could never be duplicated. This gave value to something that was natively digital. “To this day, Bitcoin’s value is based on the capacity of its blockchain to maintain scarcity,” Bauerle said.
Bright and transparent future for Bitcoin?
Serge Ciudac, founder of Stolz Investment Management in the Balkens, believes Bitcoin has a bright and transparent future ahead.
“As we know, there are only 22 million [bitcoins],” he said. “Bitcoin and Gold have one thing in common: the less that’s left, the more costly it is to mine. But since [Bitcoin] is decentralized and literally impossible to manipulate with quantities of coins – it is a perfect. It’s a transparent paying mechanism of the future.”
One trait the two share is they attract emotional investors. Investing is heavily driven by psychology, and despite Bitcoin’s recent drop from Icarian heights, Bitcoinbugs are still trusting the crytpocurrency as a safe bet.
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