The latest Bitcoin news cite the World Gold Council (WGC) which recently said that cryptocurrencies are “no substitute for gold.” The WGC, which is a market development organisation for the gold industry argued that gold is “very different” from cryptocurrencies like Bitcoin. According to them, the yellow metal is less volatile, has a more liquid market and trades in a regulatory environment among other factors.
Meanwhile, gold has appreciated 10% per year on average ever since the collapse of Bretton Woods monetary system (which pegged major currencies to the precious metal) in the 1970s, while its volatility has also reduced over the past four decades.
Bitcoin’s price, on the other hand, has been “extremely volatile – around 10 times than of the dollar denominated gold price.” Therefore, it is not really as good as a currency, the WGC said, “let alone a store of value, potentially limiting bitcoin’s use as a transaction token.”
When we compare Bitcoin trading volumes to gold, we can see that they are also “very low.” When releasing the statistics, WGC said that Bitcoin trades $2 billion on an average per day which is less than 1% of the total gold market’s volume of $250 billion per day.
Furthermore, the WGC said that gold demand is diverse, supply is responsive and is “tried and tested effective” investment option in portfolios as a diversifier as well as performing well during periods of inflation.
“[Bitcoin’s] performance has, until recently, been remarkable, but its purpose as an investment seems quite different from gold. Cryptocurrencies have yet to be tested in multiple markets,” the WGC concluded.
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