Bitcoin vs Gold: Stability and Adoption Rate are Key Elements of Comparison
The comparison between Bitcoin and gold has become a mainstream topic as much as Bitcoin itself. However, despite the current decoupling of these two assets, the groups of interested and active investors in the two are almost the same, and there is overlap.
In fact, traders and analysts on Crypto-Twitter have been studying these two assets for more than 3 years.
David Rosenberg, Chief Economist and Strategist at Rosenberg Research & Associates Inc., is one of the analysts, with Rosenberg commenting on this through a tweet on January 15, 2021. He considered comparing Bitcoin and gold and wondered if they are absurd? As per Rosenberg, no one has talked about the risk that the price of gold may fall to zero because it is impossible.
However, we may have passed the stage of discussing whether Bitcoin will become zero value as early as 2013. As the amount of Bitcoin produced drops by half every 4 years, its price will rise, and only huge appreciation and vertical growth will appear on the price chart. This is why the price has never fallen to half of the previous cycles.
The price trends in successive market cycles may be sufficient to justify price increases, but, contrary to Rosenberg’s advice, comparing Bitcoin and gold may not be completely absurd.
Despite the decoupling and similarities between the two assets, this comparison exists and cannot be denied. Rather than the absurdity, the comparisons are like a goal. They make Bitcoin more mainstream and drive adoption. In fact, one could say that the entire narrative of “digital gold” is to drive adoption in the real world.
These comparisons do not require skyrocketing prices, so what is the value-added logic of traders following these narratives at different stages of the market cycle? In fact, the Gold Fractal from the 1970s has been widely popular in the media, and it can be regarded as an ideal benchmark for Bitcoin price rebound, or another practical target.
Increased Stability and adoption rates are crucial to such comparisons. Compared with stocks and real estate, gold holders have given relatively higher returns to a certain extent, and the risk-adjusted returns of Bitcoin are better than other mainstream assets. As long as the risk-adjusted rate of return is higher than other assets, Bitcoin will not drop to zero or close to zero.
However, if institutions start selling and exiting stocks in batches, that will cause alarm, but this has not happened yet, at least not on the charts. Judging from the current price chart and trading volume of spot and derivatives exchanges, this seems unlikely to happen.
The comparison between the two assets may continue until the expiry date of Bitcoin and the fourth halving. However, according to the current situation and narrative of Bitcoin’s current price increase, the short-term impact on the trader’s portfolio will be positive.
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Originally published at https://en.icointime.com on January 18, 2021.
