Bitcoin is not only the king of cryptocurrencies but also popularly known as digital gold among cryptocurrency investors and traders. While gold is a traditional asset for investment, Bitcoin is unique as it is based on Blockchain technology. It is volatile in nature, and its price trends are powered by the dynamics of demand and supply in the market. Even though Bitcoin is considered to be a safe haven asset among other cryptocurrencies, gold is always a safer choice when it comes to investment. However, if one seeks profitable returns with a short-term investment, then Bitcoin is the better choice. If you are trying to make a choice between gold and Bitcoin for investment, then read on to gain more insight into the way in which the assets differ and how Bitcoin can have an impact on the price of gold.
Bitcoin Could Replace Gold and Silver
At present, the price of Bitcoin is approximately $10,000, while the prices of gold and silver are $15 and $1380 per ounce respectively. While the price of precious metals like gold and silver remains at the same level over time, the price of Bitcoin spikes and crashes in minutes due to its volatile nature. Most investors prefer Bitcoin as it is decentralized in nature and delinked from the economy. However, cryptocurrency assets like Bitcoin face erratic trends and do not remain as steady as gold and silver in the long run. But, the pandemic of 2020 changed the perception of Bitcoin as economies began to dwindle, throwing investors and traders into bankruptcy. At such a critical financial juncture, Bitcoin proved itself to be an inflation-proof asset for investment. The pandemic witnessed the introduction of a multitude of investors into the cryptocurrency world, as a result of which the price trend of Bitcoin attained a steady pace. However, you can overcome the volatility concern by using Bitcoin robot platforms just like Bitcoin Circuit. You check out trusted Bitcoin Circuit Review to know more about this unique platform.
How Will Bitcoin Impact the Price of Gold?
It is too early to assess the impact of Bitcoin on the price of gold. However, the upward trend in the cryptocurrency market may have an impact on the price of gold due to the reasons elucidated below:
Type of investment: Bitcoin and gold are completely different investment assets. While gold is resistant to inflation and other economic upheavals, Bitcoin is prone to erratic fluctuations. Gold is less volatile and is conventionally safer as compared to Bitcoin. Bitcoin is driven by the dynamics of market supply and demand. The constant spikes and drops discourage investors from trading and investing in Bitcoin.
Size of the market: There has to be a shift in the demand from gold to Bitcoin for the cryptocurrency to have an impact on the price of gold. Even though investors are pouring into Bitcoin, its market is hardly as big and prosperous as that of gold. It will take a lot of time for Bitcoin to have an impact on the price of gold.
Bitcoin’s Relationship With Gold Is More Complicated Than It Looks.
According to the Global Markets Strategy report published by JPMorgan, there has been a massive flow of investors from the market of gold to that of Bitcoin, and it is anticipated that this trend shall continue for a longer period. It is now apparent that investors are gradually beginning to consider Bitcoin is more profitable for value storage than precious metals like gold and silver. While ETF and SPDR Gold Shares, the two giant gold exchange-traded funds, are losing in value, the Grayscale Bitcoin Trust is overflowing with investments to the tune of a billion dollars or more. Overall, according to the current trading and investment statistics, it seems that Bitcoin shares a slightly positive correlation with gold and other traditional assets.
Bottom Line
Bitcoin can only have a slightly correlative effect on the prices of gold and silver but can never take over the market entirely. Traditional assets will always be more popular than cryptocurrencies because of the inherent stability of such assets against inflation and other market factors. It is yet too early to say that Bitcoin will replace gold and silver, yet financial experts believe that Bitcoin will be considered to be as safe and profitable as gold and silver for investment in the coming time. As the markets mature for Bitcoin and, by extension, other cryptocurrencies, there is a good chance that family offices will become more comfortable with them.
