Could Gold Investors Start Moving Money Into Bitcoin?

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Everyone seems to be focusing on Bitcoin’s power as a payment method right now. Crypto regulation and Lightning Network focused news continues to command headlines, to the point where Bitcoin’s other uses are being overlooked. Store of value is without a doubt a key attribute of Bitcoin – in spite of Bitcoin’s detractors saying otherwise. Investors are once again jumping into the cryptocurrency market, feeling that Bitcoin is on the brink of another bull run. What’s interesting is that we’re seeing a minor shift occur, because as gold’s value is tumbling some are moving money into Bitcoin as a response.

Standing as a Safe Haven

In a previous post, we asked if Bitcoin could still be considered a safe haven commodity. Generally speaking, the answer to that question is yes, as it does live up to its “digital gold” nickname. There is no mistaking that Bitcoin has the potential to take gold’s place over the long-term. In the sense that it can become a store of value commodity as an uncorrelated asset to the wider investment markets. Comparing the attributes between the two throws up some interesting results, as it’s now almost impossible not to see that Bitcoin has mirrored some of the key elements of gold.

Gold is on the Slide

Gold’s value has been on the slide for more than three months – losing 10% of its value. Speaking to CNBC, Gabor Gurbacs (VanEcks/MVIS Director of Digital Assets Strategy) thinks that the fall in gold’s value is telling, “$1,228.70 per ounce today for Comex August. Bitcoin, on the other hand, has been in rally mode, in recent days proving once again it can rally hundreds of points in a matter of minutes as it surpassed the $7,000 level.” He feels that the shift represents a major milestone in the reaffirmation of Bitcoin as a safe haven asset, “I would say as a message to investors that bitcoin is a safe haven asset or digital gold, one that trades like a tech stock.”

Billions, Trillions, and Beyond

Gurbacs’ argument is based on more than just market sentiment, as his recent price predictions and forecasts prove. He expects that that Bitcoin’s value will balloon in the coming years, pointing to the sheer size of the gold market that currently carries $7 trillion in outstanding assets. That $7 trillion figure is there to be split, with Gurbacs feeling that up to 10% could head the way of Bitcoin given the current market state. Taking Gurbacs’ predictions on board – which are admittedly optimistic – along with Bitcoin’s current market cap of $128 billion, should money from gold flow into Bitcoin it could potentially triple its value.
For Gurbacs’ bold prediction to become a reality, he feels that three market scenarios need to materialize. Firstly, proper price valuation and pricing benchmarks are critical. Next, liquidity needs to reach a level where ETFs that institutional investors use can be comfortably supported. Finally, there needs to be a supportive regulatory framework in place for digital assets. Whether any of this can become a reality remains to be seen.

Gold vs Digital Gold

It’s not a seismic shift by any means, but there is a shift occurring within the commodities markets. Traditional gold is on the back foot, with Bitcoin now starting to live up to its famous “digital gold” tag – so could Bitcoin overtake its precious metal cousin? Time will certainly tell!