What Gold needs to do if it wants to compete with Bitcoin
Bitcoin and Gold traditionally have an inverse connection with the U.S dollar and are frequently purchased as hedging instruments. Both assets are commonly used to diversify a portfolio or to protect against fiat currency inflation.
People have always invested in gold, which has provided significant returns in the past. However, over the past year, Bitcoin has outperformed gold and provided fantastic gains. At press time, for instance, the mission to BTC overtaking Gold was well underway.
Progress (Bitcoin surpassing Gold)
— Bitcoin vs. Gold (@VersusBtc) October 27, 2021
Now, even though BTC has some catching up to do with Gold (market cap), it is really closing the gap with the yellow metal.
Curiously, while most see the two assets as competitors, one executive is urging investors not to view Bitcoin and gold like that.
— Kitco NEWS (@KitcoNewsNOW) October 26, 2021
Peter Grosskopf, CEO of Sprott Inc. touched upon something similar during a recent interview. Grosskopf suggested that Bitcoin needs to be considered as an inspiration for gold as it can offer investors a hedge against inflation.
But, why’s that? Well, BTC recorded unprecedented growth as investors and consumers sought new assets to protect their wealth and purchasing power. Also,
“There is a reason why bitcoin has hit record highs and that is because there is a counter bet going on against fiat currencies. People are starting to question the Federal Reserve and starting to question the inflation picture. They are figuring out that they need to hedge U.S. dollar risk.”
On the contrary, gold’s market has struggled to lure investor demand. This is why the chief executive added,
“Bitcoin’s been winning the battle for flows. No question. And that has hurt gold in the short-term, but in the long-term, they’re both going to the same place. When I look at bitcoin, I see investors who have pulled $2 trillion out of fiat currencies, and I love that. This just shows what kind of potential gold has…”
However, here’s what the precious mental needs if it wants to compete with the digital marketplace – “It has to go digital itself.” The Gold market is probably about two years away from having a digital presence with enough critical mass to sustain itself.
“I think a lot of the technology needed to take gold digital has been proven. I expect that gold will eventually go digital, and that is going to create a lot of new users and investors.”
Nevertheless, other analysts have projected a bullish narrative for the crypto as well. Especially post the BTC Futures ETF approval in the U.S. For instance, Lark Davis, a prominent New Zealand-based trader, tweeted,
The first #bitcoin ETF on US markets broke a billion in total assets on day 2!!!!!
The previous record holder (3 days) was gold
BTC is the new gold!
— Lark Davis (@TheCryptoLark) October 21, 2021
Even PlanB, with his renowned S2F model, presented a bullish scenario.
#bitcoin S2F-ratio 56 and $1.2T market cap .. going for gold?
Notice last 13 yrs of gold S2F-ratio and market cap (purple dots) in the big yellow gold circle: gold barely moved at all. pic.twitter.com/oQYhIqr6XU
— PlanB (@100trillionUSD) October 26, 2021
Following Bitcoin’s 2021 surge, the asset’s proponents have termed it digital gold. Nonetheless, both have worked as a hedge against inflation. And, it is likely this will be the case going forward as well.