One of the reasons why bitcoin is going through an excellent 2021 is the flight of gold to the cryptomint. That is what various analysts are arguing.
From gold to bitcoin
While BTC posted a very high plus of 23% last week, the precious metal dropped 6% to $1,850.
One of the analysts Cointelegraph is Charlie Morris, founder and CIO of ByteTree Asset Management.
Bonds went up against the trend, forcing investors to adjust their inflation expectations. This is at the expense of gold and not bitcoin, according to his analysis.
Also anchorman Jim Cramer of news channel CNBC sees that some investors are stepping out of their gold ETFs and diversifying with cryptocurrency.
15 to 20% inflation per year
Bitcoin and gold both have characteristics of a port of refuge as soon as macro-economic uncertainty increases. Formally, we are assuming an inflation rate of 2%, but real inflation is much higher. The dollar and the euro have become more noticeable as a result of governments printing much more money. Moreover, products are becoming more expensive.
Pioneers such as Michael Saylor and Jack Mallers invariably talk about 15 to 20% currency depreciation per year. This is because many assets are not included in the Consumer Product Index (CPI). That is a limited measure of a trolley of groceries. A house, a car or insurance are not included.
Bitcoin and gold are doing well as soon as inflation rises, but bitcoin is now rising faster. Does that mean a change in the narrative?
Chief revenue officer Frank Spiteri says to Bloomberg news agency that the crypto currency is gaining importance on the world stage. Including traditional investors, who previously ignored it and called it a ‚ponzi‘.
We are facing a very unusual monetary situation because of the corona crisis. Insurers and financial institutions see bitcoin as a store of value‘.
The bitcoin market is now USD 760 billion, which accounts for 6.3% of the gold market. So there is still a long way to go before the cryptomint leaves the precious metal behind. Institutions such as the Mass Mutual insurer and the Ruffer hedge fund also only invest a relatively small part in BTC. A larger part is still allocated to gold.
So no reason to panic about a short-term turnaround, find gold bug Peter Schiff, who is constantly fighting bitcoiners on Twitter.
An important difference is that bitcoin has a maximum quantity of 21 million units. In theory, gold can be mined indefinitely. Mining gold is therefore beneficial for the gold industry, but because the supply can expand, it puts pressure on the bargain price.