While physical gold bars are in high demand, sending prices to a new all-time record of $2,000 a troy ounce, investors are also starting to look to Bitcoin, to hedge against any super What inflation might happen in the near future?
But which of the two assets mentioned above would be a better choice for investors looking for a safe haven outside the traditional financial system could continue to suffer. The consequences of the pandemic and the devastating path it left behind after it happened?
To answer this, PrimeXBT trading analyst Kim Chua – a former trader and market analyst – provided detailed analysis to determine which assets perform better and investors will benefit. than where to put capital.
To start, we'll go back to where the speed of the two assets' uptrends started to pick up: after Black Thursday.
On that fateful day, Bitcoin fell from $8,000 to $3,500, representing a drop of more than 50% due to emerging COVID19 fears. At the same time, gold only dropped 13.72% from $1700 to $1450. This data alone would imply that gold is a better choice for investors who value stability and a good night's sleep. On the other hand, Bitcoin's wild volatility can be a nightmare for investors who haven't experienced it, especially if gold is their barometer for market movements. But scaled back, Bitcoin's performance far outstrips gold over the past decade.
And despite a 50% drop in March, Bitcoin has recovered quickly within a week and is now significantly more bullish than gold in year-to-date performance. Gold, after hitting a new all-time high, is up 27% for the year to prove it.
In the same time frame, Bitcoin is up over 65% – more than twice as profitable as gold. Looking back further than 2016 alone, gold has only doubled in value, while Bitcoin has increased 28 times.
The main reason Bitcoin is so much better than gold is due to the limited supply. Gold also has a scarce, limited supply, making it considered a "hard" asset, but who knows how much gold is hidden in the Earth's crust, outer space, and technological advancements that can mine gold. from the ground faster.
Whereas Bitcoin's mathematical design is coded so that no more than 21 million BTC can ever exist, no new BTC can ever be created and not all of it is in circulation.
As the price of gold rises, miners are incentivized to improve their exploration and mining techniques to generate greater output and more profit. However, this has the side effect of increasing gold supply, catching up with demand and stabilizing prices.
Eventually, supply outstrips demand and gold prices drop until something economic triggers the market cycle again. Bitcoin, on the other hand, cannot be produced faster, nor can more than the limit of 21 million coins be created. As demand grows, supply can never increase, instead, valuations skyrocket.
This design has kept Bitcoin climbing in the face of gold throughout most of its history. Making matters worse for gold supplies, an asteroid has been discovered by NASA to be filled with the precious metal, severely damaging its rarity if mined.
Gold has long been a de facto safe-haven asset, but since the arrival of Bitcoin, savvy investors have started buying cryptocurrencies for the same reasons, as well as diversifying their investments. traditional investment.
As Bitcoin started to outperform gold, more and more investors decided to hold Bitcoin instead of gold. These two assets are often compared very closely, with Bitcoin acting as a digital counterpart to the physical precious metal. Significantly more people own gold due to its use over the centuries; However, Bitcoin is becoming increasingly popular in the digital age and with millennials.
Bitcoin is much more divisible than gold, more convenient to store, cannot be counterfeited, and more. However, traditional bankers prefer gold to Bitcoin due to its long history as a reserve asset and how it has survived generations of economic crises and changes to the monetary system. Many gold researchers believe that gold is the only “real money” because currencies like the dollar were once pegged to gold. This asset has long been considered the “gold standard” of monetary policy and has never failed in this role. But with Bitcoin beating gold at its own game, a new champion currency may have emerged.
Supporters of both camps have good reason to believe in each asset, but empirical evidence has shown that Bitcoin has outperformed the precious metal since its inception and is likely to continue. so.
The most transparent way to compare the price action of two safe-haven assets is by looking at the XAU/BTC price chart. The trading pair representing the progression of Bitcoin is priced in one ounce of gold. Gold has underperformed Bitcoin since its inception, and the cryptocurrency rarely looks back.
The XAU/BTC pair has been on a downtrend since 2011 and although it slowed down during Bitcoin's bear market in 2018 and 2019 while gold began to build the foundation for its uptrend, Bitcoin has ready to break again.
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Over time, Bitcoin investors have had much more significant ROI than gold holders. Gold has a market capitalization of over $10 trillion, while Bitcoin is just over $200 billion. If Bitcoin rises to a similar market cap, the price per BTC will come closer to the Bitcoin price prediction of $500,000 due to the extremely limited supply.
Even after 10 years of performance, Bitcoin could grow 50 times from here, while gold is predicted to double or triple in value from its current price in the same time period. Achieving such a price may not sound feasible for Bitcoin, but with a global currency supply of around $95 trillion and an asset capable of displacing the dollar as the global reserve currency, the This number is reasonably achievable.
Owning Bitcoin over gold has been the better investment of the past 10 years and will continue to be. Investors stuck in choosing between these two asset classes may want to consider how stronger the two options are in terms of ROI and track record. Gold researchers should also consider Bitcoin, due to its similarities and additional benefits beyond what the precious metal can offer.
Both gold and Bitcoin derivatives trading are available on PrimeXBT, where investors can build a diversified trading portfolio including safe haven assets. Users can also buy Bitcoin directly using a third-party plugin in their PrimeXBT account dashboard and make sure they don't miss the next Bitcoin bull run, in the face of quantitative easing and Grab the crown from gold for the best performing safe-haven assets.
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