With Bitcoin breaking a new all time high yesterday and gold dropping 15% since its peak, is it Bitcoin taking market share away from gold?
With Bitcoin’s bull run long confirmed and as institutional money starts trickling in, it’s apparent that Bitcoin is more than just a “speculative bubble” nowadays.
And as gold falls out of favour and its ETFs being stripped of money, can gold’s market share demise really be down to Bitcoin?
Big Money Dropping Gold For Bitcoin?
Since MicroStrategy announced its foray into Bitcoin, it’s without question the talk of every boardroom across the world as corporations work out the legalities of getting exposure to Bitcoin.
And with Bitcoin’s volatility at its lowest ever, the option of a non-correlated inflation hedge in a time of central banks unlimited printing can’t be overstated.
Gold has long been that inflation hedge and at a market cap of around $10 trillion, it’s a huge asset. But institutions only have an average of 2% allocated to it.
Bitcoin is only $360 billion, so can it really one day rival gold as an inflation hedge? No doubt as more institutional money pours into inflation hedges, gold should attract more than Bitcoin.
However, $1 trillion in gold will only move the price by 10%, whereas the same amount of USD in Bitcoin will move the price roughly 200% from here. This is why Paul Tudor Jones called Bitcoin ‘the fastest horse‘.
Bitcoin Is More Useful Than Gold
Gold was the safe asset of the 20th century and the baby boomer generation, but it’s being replaced by Bitcoin, and not just by millennials. Bitcoin is much more useful than gold.
Bitcoin has long been the playground for speculative investors, day traders, and whales manipulating the weak hands into alt coins, but things are changing, quickly.
According to JP Morgan, family offices are selling their gold ETFs and buying Bitcoin, and gold backed funds have dropped 93 tons of the precious metal just in the last four weeks.
Whereas Grayscale Bitcoin Trust (GBTC) has been attracting institutional investment and has doubled in dollar terms since August.
Nasdaq-listed MicroStrategy (MSTR) weren’t the first public company to invest in Bitcoin, but their $425 million purchase earlier this year made a bold statement. And it opened the doors for every other public company to invest in Bitcoin.
That alone brought Bitcoin as a main topic of discussion in every boardroom, and with MSTR stock price up more than 150% since, it’s starting to generate institutional fomo.
After MicroStrategy announced its foray into Bitcoin, Square Inc. spent $50 million of its treasury on BTC, and in October PayPal announced it was starting a Bitcoin buy, sell, and spend service.
Since PayPal announced its Bitcoin service, the Bitcoin price has rocketed almost 60%, as both PayPal and Square are strangle the supply of BTC.
Famed investors Paul Tudor Jones, Bill Miller and Stan Druckenmiller have all spoken out advocating Bitcoin as part of any portfolio, and when they speak Wall Street listens.
US fund manager Guggenheim recently disclosed in a Securities and Exchange Commission filing that its Macro Opportunities Fund held the right to invest up to 10% of its net asset value in Grayscale Bitcoin Trust (GBTC).
GBTC is a Bitcoin fund that invests solely in BTC, and with Guggenheim managing roughly $5.3 billion in assets, it makes its 10% proposed investment worth about $530 million.
Then yesterday, famed historian Niall Ferguson called Bitcoin ‘a monetary revolution’ and something the US government should ‘integrate into its financial system.’
Ferguson is arguably the most eminent historian alive, and when he speaks everyone pays attention. The former Oxford and Harvard professor pointed out the bullish case for Bitcoin, and it is without question more big funds and even governments are now taking more notice.
Gold hit its new all-time high in AUGUST $2067 and gold bugs like Peter Schiff were vociferating how it was going to go on and hit $5,000 an ounce. Since the heady heights gold has dropped almost 15%, as Bitcoin takes market share away from it.
That was August, around the same time Michael Saylor announced to the world that MicroStrategy had adopted a Bitcoin standard as part of its treasury. Coincidence? I think not.
Why has gold retracted so much after hitting its all-time high? Sure, it could and with the state of the economy it should bounce back even higher. But after hitting its all-time high it was expected to keep going.
It didn’t, it’s had a bigger pull back than anyone expected, and all the big named investors and funds aren’t mentioning gold as a fastest horse, or even the safest horse for that matter.
No doubt the news of vaccines has affected gold’s performance, as the demand for safe havens isn’t as demanding. But isn’t Bitcoin supposed to be a safe haven?
Some might say traders are just speculating on Bitcoin and that fomo is driving the Bitcoin price up. Institutional money such as funds and corporate treasuries don’t speculate on nascent and unproven assets.
Bitcoin is more than a safe haven, and it’s much more useful than gold.
No doubt gold is a respected store of value, but it’s not verifiable and its scarcity cannot be guaranteed. Anyone trading large amounts of gold have to either trust the custodian or worry about security, transporting, and whether it is actually gold.
All of that takes a lot of time and money. You can verify Bitcoin’s legitimacy in seconds, and you can transport it anywhere at anytime in a matter of minutes. Did I mention its security? Well, it’s safer than any vault under the City of London, and you have no worry while transporting Bitcoin either.
Bitcoin is taking market share away from gold, and as the years pass it will take market share away from every store of value.
Author: Tommy Limpitlaw
Bitcoin FAQs
Yes. Every Bitcoin can broken down into 100 million bits. They are known as satoshis, after the pseudonymous creator Satoshi Nakamoto. And some companies will let you buy as little as $1 worth of Bitcoin, which at time of writing is worth about 11,000 satoshis. There are many companies that have a system for dollar cost averaging (DCA). This is a great way to buy Bitcoin, and is known in the space as ‘Stacking Sats’. Basically, what you do is set up small automatic, recurring payments to buy Bitcoin (or sats), and you DCA over time.
There is no Bitcoin CEO. There is no central authority that directs or controls Bitcoin. It was created by a pseudonymous programmer Satoshi Nakamoto, but he gave it up to the community, and now all decisions are made by the hundreds of thousands of miners and nodes who work for the Bitcoin network.
There have been many price predictions ranging from $0 to tens of million per Bitcoin. But the truth is, nobody knows for sure. However, it is the soundest and hardest money ever created. Many say it is digital gold, but I believe in the digital age, it is more useful than gold. So, let’s say Bitcoin reaches the market cap of gold, which is believed to be $10 trillion, each Bitcoin would be worth $500,000. Is that reachable? Absolutely! Will it be plain sailing? Absolutely not!
On average, the time it takes for miners to mine Bitcoin is 10 minutes. But they don’t just mine 1 BTC. Mined Bitcoins are created with every new block and these produce the Bitcoin block reward which at the moment is 6.25 BTC, so you could say it takes less than 2 minutes to mine each Bitcoin.
A Bitcoiner since 2017 and a Bitcoin Maximalist since 2018, Tommy is our main writer and editor at Bitcoin Maximalist. Other than researching and writing about Bitcoin, Tommy loves spending time with his family and supporting his beloved Leeds United.
