Similar in nature, Gold and Bitcoin have been compared, but the precious metal is struggling to keep pace.
Gold has for hundreds of years been a safe haven of steady growth investment, due to its stability and attachment to geopolitical events. Through the years, and changes in monetary policies, even the inflation of currencies, gold has remained steady.
However, there’s a new kid on the block when it comes to a store of wealth, especially one that is unmatched by any centralized authority. Bitcoin has been ruling the roost when it comes to asset growth that is similar to gold.
Rising VIX
Whenever there is global turmoil or geopolitical fears take center stage, an asset like gold is the first to rise, as people appreciate that it is not tied to any of the goings on. Along with gold price, the VIX index also rises.
The VIX measures volatility and is also known as the fear index. It’s relationship with gold still exists, but there is a much stronger correlation with Bitcoin as the digital currency benefits far more from global turmoil.
Since May 1, we have had four noticeable increases in volatility. Bitcoin responded much more acutely than gold did to each of those rises. Now, almost six months later, Bitcoin is up over 15.5 percent while gold is only up 1.6 percent.
Why is new Bitcoin beating mature gold?
There are a few things to ponder as to why gold, as a mature asset, is losing its battle as a safe store of wealth when things go wrong. It has never let anyone down, yet Bitcoin, still very new and unprecedented, is streaks ahead in this race.
It could be that it is simply that much more accessible. People have a much easier time acquiring Bitcoin, as well as the types of people buying Bitcoin probably would not know where to even start buying Gold.
Cryptocurrencies are also not burdened by borders or of course physical locality, thus they again are that much more accessible. Being entirely digital, there is none of the hassle that comes with a physical store of wealth.
Additionally, while Gold has stood the test of time, and has not had much revolutionary competition, there’s a feeling that digital currencies are here to take its place, rather than to live alongside it.
Adoption
However, one of the key reasons for cryptocurrency leading the race against gold is that its adoption is spreading like wildfire. Gold has built its market and essentially stagnated on it, while the Bitcoin hype train keeps steaming on.
Those who want to own gold already own it, thus limiting new flows, while Bitcoin is still a nascent ‘product’ to be used as a potential hedge and an exciting and accessible asset.
Why gold can’t keep up with Bitcoin
- More wealth, and a vast array of wealth, can access Bitcoin
- Bitcoin is not burdened by borders and physical location
- Bitcoin could undermine gold as a direct competitor
- Much more adoption of Bitcoin
- Those who want to own gold, already do, its flow is limited
