Due to the current price developments, Bitcoin is shining stronger than gold.
Several financial experts confirm the thesis that Bitcoin’s current climb is partly due to the fact that the cryptocurrency is increasingly contesting gold’s market share as a hedge against inflation.
The gold price lost 4.62% last week, falling to US$1,857, while Bitcoin gained up to 40% last week. Previously, the two stores of value had been moving in lockstep.
However, Charlie Morris, the founder and chief investment officer (CIO) of asset management firm ByteTree Asset Management, no longer sees this as valid. Rather, he relates the size of gold’s downturn to the fact that some investors have arguably migrated to bitcoin.
While other factors may have caused the precious metal to lose US$50, the remaining losses could only be explained by capital being shifted from the precious metal to the market-leading cryptocurrency, Morris writes.
CNBC financial expert and TV host Jim Cramer had already struck a similar note a few days ago when he said that the capital outflows from gold „are all flowing into the crypto market“.
Holger Zschäpitz, the senior economics editor of the WELT, also supports this thesis. He sees initial evidence in the fact that the outflows from gold index funds (ETFs) have gone up at the same time as the inflows into the bitcoin investment fund of the crypto asset management company Grayscale. Even if this is only a correlation, and not a correlation of effects, it can be seen that the precious metal is getting competition.
As young investors play an increasingly important role in the future, the asset class of cryptocurrencies becomes all the more legitimate. Alongside gold as the leading store of value, Bitcoin is also increasingly making a name for itself as a hedge against inflation and an uncertain economic situation. Recent price developments could be the first indication that Bitcoin is slowly gaining the upper hand in the competition for this function.
Frank Spiteri of Coinshares confirms in an interview with Bloomberg that the narrative around Bitcoin as a hedge is gaining momentum „given the very unconventional monetary policies [of central banks]“.
„It seems that the big institutions are all discovering Bitcoin as an independent store of value at the same time,“ he adds.
The experts‘ assessments are further underlined by the fact that this week, for the first time, a Bitcoin currency unit has reached more value than 20 ounces of gold.
Nonetheless, some gold advocates reject this line of reasoning in order to bolster their precious metal. For example, notorious Bitcoin critic Peter Schiff says that investors will return to gold as soon as inflation becomes a real threat to their wealth.