In the context of central bank's quantitative easing and leading to currency devaluation, 2020 has become a modern "gold fever". Investors are flocking to gold, Bitcoin and other hard assets to hedge against the damage the ongoing COVID19 crisis has inflicted on the economy and the monetary system at large.
While physical gold bullion is in high demand, driving prices to a new all-time record of $ 2,000 a troy ounce, investors are also turning to Bitcoin, to hedge, against any hyperbole. Any inflation could happen coming.
But which of the two aforementioned assets would be a better choice for investors looking for a safe haven outside of the traditional financial system could continue to suffer. Results from the pandemic and the devastating road it left after it happened?
To answer this, PrimeXBT analyst Kim Chua - a former trader and market analyst - provided a detailed analysis to determine which assets performed better and investors would benefit. than when investing in where.
To begin, we'll go back to where the speed of the two asset's uptrend starts to increase rapidly: after Dark Thursday.
On that fateful day, Bitcoin fell from $ 8,000 to $ 3,500, representing a drop of more than 50% due to emerging fears of COVID19. At the same time, gold is down only 13.72% from $ 1700 to $ 1450. This data alone would imply that gold is a better choice for investors who value stability and get a good night's sleep. On the other hand, Bitcoin's wild volatility can be a nightmare for investors who have never experienced it, especially if gold is their barometer for market movements. But in miniature, Bitcoin's performance outstrips gold over the past decade.
And despite falling 50% in March, Bitcoin recovered rapidly within a week and is now significantly more bullish than gold in performance year-to-date. Gold, having hit a new all-time high, has grown 27% for the year to prove it.
In the same timeframe, Bitcoin is up more than 65% - more than double in profits compared to gold. Looking further back in 2016 alone, gold has only doubled in value, while Bitcoin has grown by 28 times.
The main reason Bitcoin is so much better than gold is the limited supply. Gold also has a scarce and limited supply, making it considered a "hard" asset, but who knows how much gold is hidden in the Earth's crust, space, and technological advances can mine gold. from the ground faster.
Meanwhile, Bitcoin's mathematical design is coded so that never more than 21 million BTC can ever exist, no new BTC can be created, and not all are in circulation.
As the price of gold rises, miners are encouraged to improve their exploration and mining techniques to generate greater yields and more profit. However, this has the side effect of increasing the supply of gold, catching up with demand and stabilizing prices.
Eventually, supply is higher than demand and the price of gold falls down until something economic activates the market cycle again. Bitcoin, on the other hand, cannot be produced faster, nor can it create more than the 21 million coin cap. As demand increases, supply can never go up, but prices skyrocket instead.
This design has kept Bitcoin climbing in the face of gold throughout much of its history. Making matters worse for the gold supply, an asteroid was discovered by NASA filled with precious metals, causing serious damage to its rarity if mined.
Gold has long been a de facto safe haven asset, but ever since Bitcoin's inception, savvy investors have started buying cryptocurrencies for the same reasons, as well as diversifying. Traditional investment.
As Bitcoin started to outperform gold, more and more investors decided to keep Bitcoin instead of gold. These two assets are often very closely compared, in that Bitcoin acts as the digital counterpart to the physical precious metal. Many people own significantly more gold due to its use over the centuries; However, Bitcoin is becoming more and more popular in the digital age and with the millennials.
Bitcoin is much smaller than gold, more convenient to store, can't be tampered with, and more. However, traditional bankers prefer gold to Bitcoin due to its long history as a reserve asset and how it has survived generations of economic crises and monetary system changes. Many gold researchers believe that gold is the only "real money" because currencies like the dollar were once tied to gold. This asset has long been considered the "gold" standard of monetary policy and has never failed in this role. But with Bitcoin beating gold in its own game, a new championship currency is likely to emerge.
Supporters of both sides have good reason to believe each asset, but empirical evidence has shown that Bitcoin has outperformed the precious metal since its inception and will likely continue. so.
The most transparent way to compare the price action of two safe-haven assets is by looking at the XAU / BTC price chart. Bitcoin trading pairs are priced in an ounce of gold. Gold has been inferior to Bitcoin since its inception, and cryptocurrencies rarely look back.
The XAU / BTC pair has been in a downward trend since 2011 and although it has slowed down in Bitcoin's bear market in 2018 and 2019 while gold started to build a foundation for its uptrend, Bitcoin has ready to break again.
Over time, Bitcoin investors have had a much more substantial ROI than gold holders. Gold has a market cap of over $ 10 trillion, while Bitcoin is just over $ 200 billion. If Bitcoin rose to a similar market cap, the price per BTC would get closer to the Bitcoin price prediction of $ 500,000 due to the extremely limited supply.
Even after 10 years of fruitful operation, Bitcoin could grow 50 times from here, while gold is expected to double or triple in value from its current price in the same amount of time. Reaching such a price might not sound viable for Bitcoin, but with a global currency supply of around $ 95 trillion and the asset potentially replacing the dollar as the global reserve currency, guys This number is reasonably achievable.
Owning Bitcoin over gold has been a better investment in the past 10 years and will continue to be. Investors stuck in choosing between these two asset classes may want to consider how stronger the two options are in terms of ROI and track record. Gold researchers should also consider Bitcoin, due to its similarities and additional benefits beyond what the precious metal has to offer.
Both gold trading and Bitcoin derivatives are available on PrimeXBT, where investors can build a diversified trading portfolio including safe-haven assets. Users can also buy Bitcoin directly using a third-party plugin in the PrimeXBT account dashboard and make sure they don't miss Bitcoin's next bull run, in the face of quantitative easing and Earn the crown from gold for the best functioning safe-haven assets.