Bitcoin is „emerging competitor“ to gold

Bloomberg and CME Group: Bitcoin is „emerging competitor“ to gold

Bloomberg and CME Group say bitcoin is a serious competitor to gold. That’s according to a report and YouTube collaboration between the companies.

A few years ago, Bitcoin was nothing more than a nice gimmick for many. Hardly anyone would have expected that the cryptocurrency could one day compete with gold, the ultimate store of value. However, Senior Commodity Strategist Mike McGlone of Bloomberg Intelligence stated in a recently published Crypto Wealth report that the price ratio of Bitcoin to gold could increase 100-fold by 2024. At the same time, there would be the possibility that the volatility of the digital asset would drop to gold levels. This would then result in a renewed rise in the crypto-asset.

Bloomberg says: Investments in Bitcoin funds are on the rise

According to McGlone, the cryptocurrency is already moving towards US$50,000, helped by the fact that investors are diverting their funds from precious metals to bitcoin funds. This is a strong indication of increasing adoption by institutional investors of bitcoin as a digital store of value.

The Bloomberg strategist cites the Grayscale Bitcoin Trust (GBTC) as an example. The digital fund is seeing record inflows and now manages nearly 700,000 Bitcoin. That is roughly 22 billion US dollars. Over the same period, gold ETFs fell from 110 million ounces to 107 million. Thus, in relation to the volume of all gold ETFs (210 billion US dollars), the GBTC accounts for almost 10 per cent of the market capitalisation of funds investing in gold. At the beginning of the year, this ratio was still around one per cent.

In the long term, the Bloomberg strategist predicts that Bitcoin’s volatility will adapt to the level of gold. Although the price fluctuations increase when the cryptocurrency moves into new dimensions, this is part of the process of developing Bitcoin into a digital version of gold. Accordingly, the volatility of the digital store of value would inevitably decrease the further Bitcoin progressed in this process. To achieve this, the cryptocurrency must continue to mature as its price rises. McGlone urges calm:

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It would be naive not to expect bumps from new technology. However, as long as human progress, electrification and digitisation don’t back down, Bitcoin is poised to eventually become a worthy replacement for gold in investment portfolios.