Bitcoin, an effective substitute for gold?
One hundred and twenty years ago, Oscar Wilde wrote: “Never regret your downfall, O Icarus in intrepid flight. Because the greatest tragedy is to have never felt the burning sun.
Bitcoin has experienced a “intrepid flight” since it was born from computer code at its origin in 2009. Since then, on various occasions, its price has climbed … and on various occasions, it has collapsed , as if it was destined to disappear in the Aegean Sea from the disappeared currencies.
But every time the wings of bitcoin seem to be about to melt away for good, cryptocurrency is back on its feet.
With a quote of $ 677 at the time of writing, bitcoin has tripled from its lowest in August 2015. But even then, it would have to double to exceed its record high at 1,216. $.
Will it succeed?
As the chart below shows, the trend for bitcoin prices has closely followed the trend of gold coin purchases at US Mint.
Let me explain…
The US Mint publishes data showing the volume of gold coins it sells each month. Many gold market analysts consider these data to be a good indicator of individual investor demand for physical gold, as opposed to the demand for gold substitutes such as ETFs or gold mining stocks.
WHICH SUBSTITUTE TO CHOOSE?
In general, when investors are very anxious or simply worried about the value of the dollar, they buy physical gold rather than gold substitutes. Apparently, some worried investors are also buying bitcoins. The graph below shows it well. It shows the monthly volume of gold coins purchased from the US Mint as well as the bitcoin price trend.
Interestingly, the two trends follow each other closely. Could it be that some worried individual investors are buying bitcoins at a time when other worried individual investors are buying gold?
This seems to be the case.
I imagine that bitcoin buyers mostly belong to Generation X and Y, while gold buyers are mainly baby boomers, not so young.
In other words, it seems that several generations of investors are moving away from the dollar, and this is just beginning. As this leak grows, the price of bitcoin and gold will feel “sunburn” at high altitudes. In my opinion, bitcoin and gold will both set new record highs in the next two to three years.
But as a member of the Baby Boomer Clan, I prefer gold to bitcoin . I am always afraid that crypto-currency mystique will fall into the abyss at one time or another.
Nevertheless, it is notable that those who buy bitcoins seem just as eager to hedge their exposure to the dollar as gold buyers.
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