This question has been worrying for quite a long time for anyone who is at least somehow aware of the development of a unique digital currency – Bitcoin. Many fans of cryptocurrency claim that in a short time Bitcoin can surpass the precious metal in cost. And not just bypass gold, but also to become a full-fledged winner in this market war. So, we decided to consider this issue in more detail. Will Bitcoin be able to circumvent gold by value, or is it all just fiction and speculation of crypto enthusiasts? Is a cryptocurrency able to exceed the sum of the world’s gold reserves, amounting to 8 trillion dollars?
The value of gold vs Bitcoin’s current market capitalization
Since ancient times, gold is the most reliable “currency” and is used to support the economy of any state. The total stock of the precious metal is estimated at $ 8 trillion. Such a price arose due to the limited gold reserves, and the ever-growing deficit also greatly affects its value.
Bitcoin has existed for more than ten years, and during this time it has experienced many high-profile highs and similarly stunning falls. According to the latest data, the cryptocurrency capitalization amounted to six billion dollars, which was greatly influenced by the loss of up to eighty percent of the market value due to the rapid decline in the exchange rate last year. On the other hand, all Bitcoin fans remember 2017, when the cost of a cryptocurrency unit was more than twenty thousand dollars. Many argue that it is quite possible another rise in prices, which will beat the “golden” record.
It was during the startling rise of the price of bitcoin two years ago, analysts and crypto investors began to discuss the possibility of rivalry between digital currency and gold. Bitcoin was even called the digital equivalent of gold. Even after its fall in 2018, lovers of cryptocurrency do not leave their optimistic attitude – they are confident that the new technology will rapidly increase in price and beat the value of gold.
What factors are able to level Bitcoin and gold?
The main reason for the appreciation of the precious metal is that its amount is limited, and gold is the most valuable way to keep your savings. In addition, the price per gram of gold is influenced by inflation and scarcity — every year the amount of gold mined becomes less and less.
All the same factors apply to Bitcoin. Only there is one significant difference – the lack of physical essence. However, according to crypto experts, this should not greatly affect the growth of the value of digital currency in the long term. Bitcoin mining is limited to twenty-one million tokens and eighty percent of them have already been mined. Finally, the extraction of this cryptocurrency will end in 2140, which by world standards is not so long. It is this fact that recently forced many Wall Street investors to reconsider their attitude to Bitcoin.
One of the world’s largest financial companies, JP Morgan announced that it was reconsidering its attitude to a digital asset – because of the price volatility of Bitcoin, experts saw advantages in trading this product. One of the analysts of the organization openly stated that he does not consider cryptocurrency to be another “bubble” and will attract investors to invest their funds in Bitcoin, since the decline in the rate will soon turn into growth.
Another fact in favor of Bitcoin is its deficit – the more investors come now, the more the cryptocurrency will cost by the end of its development.
The only reason why users can view digital currency as a substitute for gold is to use a new technology when it is created. For a short period of life Bitcoin managed to survive and the currency is not going to disappear.
It is too early to talk about this, since to replace gold with cryptocurrency, a lot of complex and lengthy processes have to go through. For example, eliminating technical difficulties associated with scalability, fees, and time to conduct transactions. After this, regulators must create safe reform processes. Only in this case, the value of Bitcoin can rise to the current heights of gold.
Editor of IMD News