Crypto adoption has surged in countries with failing monetary systems and the main reason for that is because of its ‘unconfiscatable’ nature. In western countries maybe people don’t need yet bitcoin but in countries like Venezuela, Argentina, and other cryptocurrencies are playing an important role.
You can not stop people using cryptocurrencies and this censorship-resistant quality is the most important quality that money may have. In the future, even in western countries, people will realize how important is the Unconfiscatable Asset for the financial system.
On the other side, gold have been people’s money for thousands of years but it is heavy to be carried, can not be transacted online and in our wold with metal detectors is easily confiscatable.
Is Bitcoin the new Gold?
A report from the University of Pretoria entitled “Is Bitcoin the New Digital Gold? Evidence From Extreme Price Movements In Financial Markets.” Point to arguments comparing Bitcoin with gold.
The report states that Bitcoin is a good hedge like gold in a time of economic uncertainty. A claim that is getting popular on the media especially those crypto enthusiasts that see crypto as the money of the future.
In times of global financial concerns, investors leave stocks to protect their capitals and look for safe assets. This theory is also supported by the statistical framework model the report shows pointing to two things.
First, they concluded that the possibility to make a profit in safe havens increases during the stock market crash and decreases during the stock market surge.
Second, they concluded that Bitcoin is one of these safe havens.
“By combining each equity market with bitcoin, we find that the correlation of extreme returns sharply decreases during both market booms and crashes, indicating that bitcoin could provide the sought-after benefits of diversification during turbulent times. A similar result is obtained for gold, confirming its well-recognized status as a safe haven when a crisis occurs. Finally, we find a low extreme correlation between bitcoin and gold, which implies that both assets can be used together in times of turbulence in financial markets to protect equity positions,” says the report authors.
However gold proponents think that gold is doing fine and bitcoin is not necessary. While many of them think that there are similarities between gold and bitcoin (e.g. as a store of value because of scarcity) still they think that gold has a long history as a store of value and bitcoin is a new asset that has been around only a decade.
Also, gold proponents point to the bitcoin dependence on the internet as a point of failure in case of an apocalypse. In that case, you can not buy anything with bitcoin, while you can always pay with physical gold to buy for the necessary things.
However, it might be a generation thing. While old generations may think about a scenario when the internet is cut off the world, millennials can’t imagine that because they were born in a world there was always the internet. The world is getting more connected every day and with ambitious projects like Elon Musks’ Starlink and others, it is hard to think of a world without internet connection.
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