Are bitcoin and gold the same? Could the cryptocurrency resist financial storms for hundreds of years? These currencies are equivalent – in a direct and indirect sense. That’s why we must take this into account if we intend to trade.
Is Bitcoin a New Gold?
Recently, economists often compare the value and stability of cryptocurrency with a valuable metal. How can we explain the incredible growth of bitcoin in the last few years?
First of all, justifications are demanded by investors. They do their best to monitor the dynamics of bitcoins, even if it is not convincing enough. There are many explanations for this incredible success, but some of them are not so easy to understand.
Bitcoin, ethereal, and other liquid cryptocurrencies can grow regardless of the obvious reasons. It is important to establish reasonable explanations for a detailed analysis of the level of activity in the market, participation, and leadership. According to financial expert John Kicklighter, the role of bitcoins in the modern market can mislead us.
Historically, there is a traditional alternative asset, for “hedging,” trading in markets and financial systems – gold. Throughout many eras and evolution of civilization, this precious metal has proved its endurance due to its stability.
Currencies and the Crisis
Returning to the last Big financial crisis of 2008, we can visually examine the value of gold on the world currency market. For gold provided the currency in the films during the economic crisis. And this is very noticeable when the cost of this metal increased by 180% in three years from 2008 to 2011.
The increase in profits was the mass integration of financial markets. The Fed, the European Central Bank, the Bank of Japan and the Bank of England cut their rates and continued to implement significant mitigation measures. This led to a flood of dollars, euro, yen, and pound in the system, which evenly devalued the most liquid reserve currencies in the world.
While some funds would seek a secondary level, gold again quickly took advantage of its historical role as an alternative. It is worth because when a precious metal remains depressed than when it grows with the same degree of enthusiasm as it turned out with gold.
Conditions of Bitcoin
Now consider the same conditions for bitcoins. If there was a general recession in the exchange rates of fiscal currencies, would it be possible to preserve the value of the cryptocurrency?
At the moment, the volume of the market – too extensive to test this theory. Also, the volatility of the cryptocurrency is dangerous for those who expect a stable withdrawal of funds. Moreover, the regulation of the bitcoin market leaves a risk of breaking and even a sudden change in the world, which can suddenly create financial problems.
Because of the limited resources, there is a lot of bitcoin competition. Given the rapid increase in the price of the cryptocurrency, many are interested in resale bitcoins.
Thus, without taking into account the risk factors, these two assets are very similar, since there is an alternative to modern world currencies. However, this does not mean that we should blindly buy gold or bitcoin. It is still necessary to take into account the factors that affect the dynamics of growth and fall of the courses of these stable currencies. Invest safely!