Bitcoin is the "digital gold", at least this is what its fervent defenders affirm.
They argue that the volatile cryptocurrency is the 21st century's response to precious metals, and that someday they could replace gold as an important store of value for investors around the world.
But is it really likely that BTC will replace real gold in the pockets of investors in the short term? According to Mornigstar Research analyst Kristoffer Inton, the answer is a NO! resounding
In a recent research note for investors, the named analyst presented five criteria that gold, as a "safe investment" meets. And that cryptocurrencies like Bitcoin also need to be successful to be considered as an investment of equal size, that the precious precious metal.
In particular, these criteria do not include volatility anywhere, something that investors want to avoid at all costs for investments that need a safe haven. Bitcoin is, infamously prone to episodes of extreme volatility. In less than 1 year, its price has skyrocketed from around US $ 4,000 to almost US $ 20,000, before returning to around US $ 6,500 today.
What are the 5 areas?
Liquidity
Functional purpose
Lack of sources
Certainty of future demand
Permanence
The analyst marks the 5 squares for the commodity that is the gold, while for Bitcoin it only marks 2.
First the liquidity. An investment vehicle needs to be exchanged regularly, and Bitcoin is notably not liquid, as crypto investors accumulate their digital currencies or as is known in the ecosystem (Hodl).
"Current trading levels see a daily volume of approximately 0.5% of all existing Bitcoin"
The following is the functional purpose. In addition to being a universally recognized stock store, gold actually has a functional purpose, from its use in circuit boards, jewelry and tooth replacement. The sole purpose of Bitcoin is like a coin and deposit to see it, and at this moment in history is rarely accepted for real purchases.
However, Bitcoin has a shortage of supply, a necessary component to retain the value. There will only be room for a maximum of 21 million Bitcoin in existence, a rule written in your code from day 1.
On the side of future demand for Bitcoin, it is a great unknown. The digital currency has existed for less than a decade, there is no guarantee that the BTC will be one of the definitive winners of remaining within the markets. In contrast, gold has been accepted as valuable for more than 5,000 years, being considered a fairly safe bet.
Finally, we have the remainder, it refers to whether the investment resource degrades over time. Gold is a precious metal that does not tarnish or oxidize; Bitcoin too, will not rot or deteriorate.
Inton believes that the largest cryptocurrency of all is unlikely to attract significantly the dollars of investors seeking a safe haven for gold.
"For the cryptocurrency to challenge investments in gold, we believe that there must be an additional certainty around the popularity of Blockchain security and cryptocurrencies and they should come one after the other, and a volume of liquidity will be needed that allows the improved negotiations. "