Director of digital asset strategies at VanEck, Gabor Gurbacs, considers Bitcoin to be a safe haven investment like gold and calls Bitcoin, digital gold. He suggests that investors who typically buy gold might diversify and buy Bitcoin, and perhaps 5-10% of the USD 7 trillion invested in the gold market may transfer over to the leading cryptocurrency. This would increase Bitcoin’s value by hundreds of percent to USD 28,000-48,000 since the current Bitcoin market cap is USD 128 billion and 5-10% of the gold is USD 350-700 billion.
Gabor Gurbacs further says that institutional investment will be facilitated by proper price benchmarks and valuation, liquidity, and regulatory support. He believes there is already sufficient liquidity and proper price benchmarks, and regulation is quickly maturing.
Bitcoin is like gold in a couple of ways. First, it is an asset that investors can physically hold onto, and is actually better to hold than gold because it doesn’t take up any space and is cryptographically secure. Second, just like gold Bitcoin can be produced from mining. One thing that makes Bitcoin far better than gold is it can be sent anywhere in the world instantly and securely, inherently making it much more liquid than gold.
The USD 7 trillion of money invested in gold that Gabor Gurbacs is referring to is physical gold. Thomson Reuters, which conducts an annual gold survey, says there are 171,300 tonnes of gold in the world as of 2013, and with 32,000 ounces in a ton and the gold price near USD 1,200 an ounce, this yields about USD 6.5 trillion, and extrapolating for mining since 2013 probably brings the figure up to USD 7 trillion.
However, it is not accurate to account for just physical gold when talking about the total amount of money invested in gold. COMEX and London OTC issue large amounts of paper gold, which is a certificate that can be redeemed for gold, and the international gold price is purely set by paper gold markets like COMEX and London OTC. As of January 2016, there was 542 ounces of paper gold for every ounce of real gold in registered reserves, so the gold price is probably far lower than it should be since the market is saturated with paper gold that has basically no real gold backing it.
The fact that the gold market is under siege by paper gold is a good reason for investors to move their money into Bitcoin as it cannot be printed at will like paper gold and fiat currency. Therefore, if an investor puts their money into Bitcoin they don’t have to worry about losing value from centralized money printing.
So perhaps, Bitcoin isn’t digital gold like Gabor Gurbacs is saying, but far better than gold. Gold could only be comparable to Bitcoin if the paper gold markets ceased to exist. Some investors looking to store their money in safe havens outside of the stock market will choose Bitcoin over gold. One thing inhibiting this is the tremendous volatility in Bitcoin’s price. The gold market is mature and has much less volatility, making it safer as a store of value on a day to day basis. In the long run, Bitcoin has been outperforming gold. However, during the same time that gold has barely seen any growth in value Bitcoin has gone up in price by orders of magnitude.
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