Gold vs Bitcoin: pandemic-driven stimulus fuels growing rivalry

Gold pundits frown at the claims. The World Gold Council, which aims to stimulate and sustain demand for the yellow metal, argues gold, a “high-quality liquid asset,” is more practical, with more diverse supply sources and whose ownership is less concentrated.

Gold may complement the newcomer in a scenario of widespread asset price inflation.

Bitcoin investment is becoming more mainstream.

Nicknamed “digital gold”, Bitcoin looks set to retain an innate value because its 21 million units are a finite supply.

From a London Bullion Market Association-recorded monthly average of $35.18/oz in January 1968, it touched a record $2,067/oz at one point in August 2020.

Producer Serabi Gold also anticipates the gold price will rebase itself above $2,000/oz over the next few years.

Bitcoin’s rise has been nothing short of explosive.

Total supply is valued around $700 billion, from $200 billion a few years ago: a chunk of the total cryptocurrency universe of some $1.75 trillion.

Analysts believe its value may near-double this year to at least $80,000 per unit, while gold is widely expected to return to over $2,000/oz.

Unlike gold, there are no smuggling or conflict-mineral concerns in Bitcoin, even though its origins may have lacked transparency.

It has “a nastier carbon footprint than gold and is possibly the dirtiest financial instrument ever created”, Thieriot admits.

A March 17 Bank of America research report labelled carbon emissions from Bitcoin mining as a “dirty secret”, linking Bitcoin to Chinese coal due to Chinese-driven investor power.

Central Banks, which have in the past set great store by gold, are not known so far to have invested in this digital alternative, though Theiriot considers this “inevitable” in future.

So is the rush towards Bitcoin sustainable? According to BoA the main portfolio argument for holding Bitcoin is not diversification, stable returns, or inflation protection, but rather sheer price appreciation, a factor that depends on Bitcoin demand outpacing supply.

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