Bitcoin Transaction Volume Surpassed Gold
Bitcoin “BTC” seems to have knocked gold off its perch. The latter has long been a popular safe haven investment due to the fact that its value has never diminished. But Bitcoinist recently pointed out that Bitcoin has been clearing more transaction volumes than the global gold markets since Q2 of 2017. Currently, Bitcoin is the most popular cryptocurrency in the world, and it is also the one with the highest value. And despite the extreme price fluctuations, seems to show more utility in this digital age as compared to gold.
Let’s first understand why investors trust in gold. FXCM claims that gold is often used in coins or jewelry, or as a derivative through futures contracts. This is because it has no expiration date, unlike other precious metals such as copper. Hence, it provides more stability for traders. If there is one thing gold holds over BTC, it’s that it boasts a thousand-year history of being a trusted safe haven investment. In the midst of any global event that can disrupt markets, investors would typically turn to gold for safety. Many choose to diversify their portfolios in the face of inflation or economic events that are potentially detrimental to their current financial holdings. Throughout the centuries, people have tried to dethrone gold with other assets, like salt and florins, but none have withstood the test of time the way that gold has.
Bitcoin Advantage Over Gold
However, Bitcoin has proven to be a viable challenger. At the end of 2017, its value jumped from just over $1,000 to around $19,000, leading many traders to believe that it can actually serve as a decent store of value. TechCoins’ post on how Bitcoin works explains how the cryptocurrency is very similar to gold, because ownership of it is proportional to the ownership of a lump of valuable metal. But Bitcoin has even better features. Unlike gold, which is stored in a single place and cannot have back-ups, Bitcoin wallets can have numerous duplicates in other networks due to its decentralized nature. It can even be imprinted on paper to serve as a hard copy. So in a sense, storage may be more secure than gold deposits because of modern blockchain technology.
ARK Investment ‘s Chris Burniske also sheds light on another key advantage Bitcoin has over gold, saying, “A well-known characteristic about bitcoin is that it’s on a disinflationary supply schedule. While many people think of gold as being the same, gold is actually a sneakily inflationary asset.” According to him, gold’s global supply has increased unnoticeably by 1 to 2% every year over the last century. And unlike BTC, gold is not set up to preserve value.
However, it’s important to note that trading BTC is definitely not for the faint of heart because of its unpredictable volatility. CNBC recently reported how Bitcoin’s value increased from $6,466.50 to $6,858.61 in just a span of one hour. It then decreased to around $6,663.96 in the afternoon of the same day. In July, the cryptocurrency enjoyed price ranges of around $8,400, only to slump below the $8,000 mark in a matter of hours. Therefore, it’s not surprising that analysts have such polarizing opinions on BTC’s future and its benefits as an investment asset. As a result, many financial advisors do feel that Bitcoin investments feel more like a leap of faith than anything else. The numbers, however, do not lie. With Bitcoin transaction volumes transcending that of gold, it’s going to be interesting to see what the future holds for the cryptocurrency and all who choose to trade it.
All in all, Bitcoin may have surpassed gold’s transaction volumes, but it’s not recommended for investors to simply substitute one for the other. Ideally, traders should diversify their portfolio with assets that don’t move together. That means Bitcoin and gold can actually co-exist as complimentary assets. Currently, BTC seems to be a probable short-term investment, while gold storage is a safe bet for the long-term. It’s not clear if Bitcoin will ever stabilize in the future, but seeing as it’s still the highest valued cryptocurrency, it’s often viewed as a must-have in one’s portfolio.