February 1, 20183min1209

Can Bitcoin replace GOLD?

We wonder, can bitcoin replace gold?

Bitoin is ‘too volatile’ to replace gold, according to the World Gold Council.

There have been claims from some that bitcoin will eventually replace the yellow metal. The World Gold Council disagrees. In a report, it argues that they are very different and that gold is less volatile, stating:

In our view, bitcoin and cryptocurrencies more generally are not a substitute for gold. Gold is a tried and tested effective investment tool in portfolios. It has been a source of returns rivalling that of the stock market over various time horizons, it has performed well during periods of inflation, it has been a highly liquid, established market, and it has acted as an important portfolio diversifier, exemplifying negative correlation to the market during downturns.

Bitcoin’s performance has, until recently, been remarkable, the report adds. At the end of 2017, the number one digital currency saw its value rise to within $20,000 for the first time. The report states that this was largely due to investors looking for ‘extremely high investment returns.’ Notably, since then the cryptocurrency’s price has dropped significantly. As a result, it is now trading under $10,000, at $9,405, representing a 6.76 percent drop in 24 hours, according to CoinMarketCap.

Unlike bitcoin, which experienced a 13-fold increase in value throughout 2017, gold saw a steady rise of 13 percent, the World Gold Council reports. Not only that, but because it is less volatile, has a liquid market, trades in an established regulatory framework, and has a well understood role in an investment portfolio, the report claims that these characteristics will ensure that the yellow metal continues to resonate in today’s digital world. 

Not only that, but compared to gold’s 7,000-year history as an asset and a long-standing role as money, bitcoin pales in comparison. While bitcoin may be gaining mainstream attention, it’s struggling to achieve official approval. Many countries are cracking down on the market.

China, South Korea, and, more recently, India, are laying down the law, which is impacting market prices. As a consequence traders may be worried about whether the digital currency’s price will drop any lower and if now is the time to sell.

Of course, it’s only natural for the World Gold Council to express these views regarding the cryptocurrency market.

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