There has been recent fear of the possibility of bitcoin taking over gold, regarding the world’s preferred store of value. This comes as a result of the seeming increase in popularity of the cryptocurrency, and its consequent use tendencies. Now, while some speculators think this may happen sooner than not, others have rebuffed the claim saying the chances were too insignificant. A major reason for this rather germane fear is the fact that investors in gold are trying to know their possible stand, to prevent catastrophic losses in a manner that may seem all too sudden.
But then, some economic and financial analysts have come out with fact sheet results that uphold the opinion that bitcoin could not overthrow gold; especially as far as some prevailing conditions continue to present themselves.
According to a study whose reports are contained in the paper titled The economic limits of bitcoin and the blockchain, there was no way bitcoin could become a preferred value store over gold because the lapses of the cryptocurrency could not see it rise to the rank. The report claims that if bitcoin were to rise continually, then there would be an accompanying vulnerability effect for the cryptocurrency, thus bringing it all utterly down.
The Obvious Determinant Indices
There are significant reasons why bitcoin may genuinely not stand a chance against gold. If there’s going to be a shift in the value store, we can be certain that investors would have considered the following factors before finally taking sides.
Bitcoin is rightly considered to be operating in a bear market
By this, the pricing for bitcoin at every point in time is largely unreliable and cannot be trusted. This means the asset entity can’t retain any defined monetary value for a reasonable period that people can be pretty sure. For instance, bitcoin prices dropped from an all-time high of about $20,000 to about $6,000 within six months. These are the characteristics of a volatile entity, which would not be a considered option.
The overall gold trade market is an estimated 50 times in value when compared with bitcoin
As it stands, the bitcoin network would require a lot of growing up if it would be able to match up with the current world value of the gold market. Bitcoin whose market capitalization is placed within the range of a little over $130 billion is still far behind when compared to gold’s $7.7 trillion overall market value. If there would be any chances for a takeover, then bitcoin must be able to approach well over one trillion.
Bitcoin network maintenance is expensively demanding
The cost of daily maintenance of the bitcoin network and its susceptibility to fraudulent attack cannot be overruled. These are some of the requirements and plaguing demerits of bitcoin. While these factors could severely hinder bitcoin’s progress, there are no such issues for physical product gold to tackle.
If these factors and others are anything to go by, then it could take numerous years to come, before bitcoin gets close to making this achievement.