Goldman Sachs Says Gold Is Better Than Bitcoin
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Bitcoin has slumped since the cancellation of a technology upgrade to increase its block size, amid speculation supporters of the proposal bid up bitcoin cash to undermine the original bitcoin. While increasing its block size would help, opponents argue it would only concentrate mining power, undermining the decentralized nature of bitcoin.
The race to mine new Bitcoins, exacerbated by rules that make the process use more computer power as time goes on, threatens one day to consume as much power as the whole of Japan, according to Citi. But this is a problem only as long as people are desperate for new Bitcoin, and only as long as its rules remain fixed.
The dramatic events over the past three days have shown us that neither is guaranteed. An inability to evolve as a piece of code without tearing itself apart. Although Bitcoin was designed to be a functional payments network, it has failed to live up to those expectations. Each entry in the Bitcoin payments ledger—or, in crypto-parlance, each block in the blockchain—is capped in size, and transactions are slow to process. Given the obstacles to spending Bitcoin like a currency, the incentive has been to hoard it like a commodity.
If this were Microsoft Corp. But this is crypto-land. An issue as trivial as increasing capacity ended up kicking off a civil bitcoin more than gold among developers, miners and evangelists that has raged for several years. Those who want to keep transaction batch sizes small are accused of being nostalgic cyber-idealists, while those who want to ramp them up are accused of wanting bitcoin more than gold centralize power among wealthy vested interests.
In protest, a new crypto-currency with bigger block sizes, Bitcoin Cash, was launched in August. As for Bitcoin, a bitcoin more than gold solution intended to launch last week failed to get off the ground. These events have triggered a step-change in how markets view Bitcoin—just as Wall Street was starting to get comfortable with trading it.
The computing power of the miners is switching away from Bitcoin to its would-be successor in search of more dependable profits. Regardless of which side has more merit, investors will no doubt be scratching their heads at a far more fundamental question. If every developmental fork in the bitcoin more than gold for Bitcoin leads to a new currency branching off, how sustainable can its price boom be? A commoditized technology, in other words, rather than a technological commodity. The question now is, is Bitcoin a better store of value than gold?
To answer this we need to know what is driving the lacklustre performance in gold and if the factors weighing on the yellow metal will last. Here are some of the attributes shared by gold and bitcoin:.
Overall, you could argue that the story behind bitcoin is stronger than it is for gold right now and that is the chief reason why gold is lagging behind Bitcoin. The potential for Bitcoin and crypto in general to overtake bitcoin more than gold fiat currency system in the coming years bitcoin more than gold also a powerful driver of demand, and is something that gold cannot compete with.
We would caution against writing gold off completely for a few reasons:. Gold cannot keep up with this and it is natural that we see some drift away from gold and into bitcoin in the coming months.
In the short-term this may continue to weigh bitcoin more than gold the gold price, however, if we get a period of market stress then it could be time for the gold bugs to step up a gear as no one knows how bitcoin will react to a market panic.
If the ownership of bitcoin is as concentrated as some estimate, then the liquidity issue distills down to the actions of the top tier of owners. Longtime correspondent Mark G. The standard explanation for the sharp decline was that gold was sold off to meet margin calls and other obligations arising from the Global Financial Meltdown of late That gold was perceived as a reliable store of value may have increased its attractiveness as an asset to sell in the mad scramble to raise cash.
I propose that the performance of gold in offers an indicator into how bitcoin is likely to behave. Is it possible to do so on a large enough scale to affect market liquidity in any particular market?
Can the physical bitcoin more than gold of daily life be commonly paid for directly and locally using bitcoin? I mean things like food, fuel, medicine, clothing and local debts for utilities, taxes, rents and mortgages.
Can it pay leases, electric bills and purchase the servers required for this? If not, and precisely because there is a limited supply of bitcoin, it seems a certainty that the financial failures previously seen in the decades prior to the Federal Reserve Act are likely to recur in the bitcoin infrastructure for precisely the same reason: And until bitcoin is ready to pass these tests I think it too will collapse in any future Global Financial Crisis. Bitcoin more than gold is an issue in any financial crisis, as sellers may be unable to find buyers at any price.
Bitcoin has two liquidity issues:. Will sellers of bitcoin find a bid from buyers if a flood of bitcoins hit the market as speculators sell assets to raise cash to meet margin calls or simply book profits in volatile markets? A liquidity crunch has the potential to unleash a positive feedback loop i. Another potential factor is the ownership of bitcoin.
The topic is complicated because one individual can own a number of exchange accounts, wallets and coins in cold storage. On the other hand, one address might represent more than one owner. To further complicate matters, an unknown number of bitcoins have been lost, i. For this reason, charts of bitcoin distribution bitcoin more than gold to addresses, not individuals.
The acronym HODL pops up a lot in the crypto space: If the ownership of bitcoin is as concentrated as some estimate, then the liquidity issue distills down to the actions of the top tier of owners: If most of the major owners have eschewed debt and margin in favor of cash, bitcoin, gold, etc.
Given bitcoin more than gold limited number of bitcoin available to trade, liquidity could dry up very quickly if major blocks are dumped on the market. Given the strong views bitcoin arouses, it may come down to how many major owners will HODL in a panic-soaked financial crisis, how many will avoid being forced to liquidate their bitcoin holdings to meet margin calls or other obligations, and how many will have the wherewithal and the courage of their convictions to be buyers when volatility soars.
One thing we can anticipate with some certainty is that one camp will be right and the other camp will be wrong. Please check back for new articles and updates at Commoditytrademantra. November 13, Under: This also makes stocks more attractive than gold from a yield potential.
Sluggish demand is coming from significantly lower inflows into gold ETFs and a softer jewellery market in India, according to bitcoin more than gold World Gold Council. Here are some of the attributes shared by gold and bitcoin: Both are decentralised, and are not under the control of a central bank bitcoin more than gold other authority. They are considered a store of value. But, the crucial differences between gold and bitcoin include: Demand for gold ETFs has also slowed, one bitcoin more than gold may be the prospect of more bitcoin-linked products that are about to come onto the market including bitcoin futures listed by the CME and bitcoin options listed bitcoin more than gold the CBOE.
Some investors may be taking money out of gold-backed funds in anticipation of investing in bitcoin when these new products go live. Gold has been around for millennia, bitcoin is the new kid on the block, which is inevitably adding to its lustre. The case for gold: We would caution against writing gold off completely for a few reasons: Gold positioning, as measured by the CFTC, is still relatively strong even bitcoin more than gold it has backed off the highs of the year.
There are currently 1. The technical picture also suggests that any further decline in gold could be capped by some key support levels including the Gold is a tried and tested safe bitcoin more than gold. Bitcoin is yet to be tested during a period of intense financial stress. Can the cryto currency only rally in a low volatility environment? If that is the case, then old-fashioned gold could see its fortunes rise once again, but we may have to wait for the elusive market sell-off before we can get excited about a bitcoin more than gold resurgence for gold.
City Index and Bloomberg Chart 2: I propose three practical tests for bitcoin. Bitcoin has two liquidity issues:
