To put Bitcoin against gold, might seem like a desperate attempt to bring digital assets to somewhere where they are probably not as of now, but that might not be the whole story, and if things are to continue as they are right now, the day cryptocurrencies take control of the supreme position of investment against gold and other valuable material assets might not be far.
It is a general expectation that gold will be the only thing left at the end of the world, never to have lost it’s monetary value, but if you look at it from another perspective i.e. cryptocurrencies, especially bitcoin, right now does much better in the fields of whatever people like to do with gold. They’d want to store it and invest all their money into it, keep it till the day before the end of the world. This bias has given gold the fortunistic status that it carries and because of it, there has become a market for ‘assets as insurance’ for times of disaster and recessions.
On July 17, 2018, Bitcoin skyrocketed. It’s still not close to how once it was evaluated to land at, but it is maintaining an expensive position at the top of all cryptocurrencies. It surpassed average annual price of gold back in 2014 at $1,242 and has reached miles above that valuation.
However circumstantial evidence that maybe, the mere fact that the bitcoin never came back to earth and has not been followed to great extents by other cryptos suggest that it is here to stay and will only become stronger. .
What caused this sudden spike was the Chinese devaluation in wake of the trade war with US. It was an inside job, that was planned and significant. The Chinese currency devalued, which set off Bitcoin’s rally.
Chinese trade war with the US
At this point, it is important to understand the repercussions of the China-US trade war on BTC’s valuation. The trade war between the two most powerful economies of the world refers to the ongoing introduction of tariffs on goods traded between the two countries.
In April 2018, the US imposed tariffs on steel and aluminum imports from China, Canada and other countries of the European Union. On July 6, US imposed 25% excise on Chinese goods as part of Donald Trump’s new tariffs policy. This led to China responding with a similar taxation on US products.
Then, on July 10, the US Trade Representative (USTR) published a list of $200 billion in Chinese products to be subjected to a new 10% tax. China responded, branding the charges “irrational” and “completely unacceptable” while the Trump administration said that the excise was necessary to protect national security and intellectual property of the US businesses, and to help reduce the mutual trade deficit among the two nations.
A dialogue is still going on between the two, but a resolution is not expected to be reached soon.
Bitcoin acted as better gold
So, rich and powerful people, with the resources to know about upcoming currency valuations knew about this expected dip in the Chinese currency before the actual happening. They dumped their Yuan for bitcoin which was a safe bet as bitcoin may as well be dollars.
This is what people have been doing in the past, in periods of devaluation or worse, recessions, they have always been quick in changing their currency to gold or other material assets to become safe from the drop in currency. This concept is now selling over cryptos and more particularly, with Bitcoin.
Imagine being told that your currency is about to drop a chunk, you cannot trade foreign exchange but somehow, you can change it to BTC. You are going to do it in the blink of an eye and are not going to be choosy about the price value. Which, certainly betters the concurrent fiat that is in decline. You will keep the Bitcoin till the storm is up because a material trade conflict could get very uncertain and in hindsight, nasty. What BTC holds over the old favorite (gold) is the swiftness and security of trade that cryptos offer. One simply could not make these investments and sell them at the right time with gold at hand.
Jury still out
While BTC has managed pretty well, the jury is still out on Bitcoin or any form of cryptocurrencies taking primacy from gold and other material assets due to the sentimental value attached to it and of course, the years of practice behind. Previously, gold has served as this hedge fund for when currencies have devalued and debased. It has been a worthy asset to hold than naked cash in all circumstances and has seen the most investments when the going gets tough. This is another pin to why gold prices always remain on the high, because traders and insiders know that they can afford to let the currency take a fall at any given time but they will not let gold go, as it has been buffed with millions and billions of cash.
So this is what happened to Bitcoin. Chinese insiders stuffed billions of the Yuan into BTC at the opportune moment and while Chinese currency devalued, Bitcoin rose and rose hard. Bitcoin in this instance, replaced gold firmly and did so because maybe people are starting to believe how hard an asset gold is to carry, now that a possible alternative has come up. Even myself, as the normal guy I am, I would find it difficult to purchase lots of gold in a short time and afterwards, I would just not feel safe and at ease to hold on to it.
While I could fill a pocket’s worth of bitcoin in an instant of a transaction and I’d yet be able to seamlessly flip it back into fiat, whenever I please. So the call right now is to put the bear market to a halt, till the ongoing trade war does not resolve itself. When it’s over, the bear market will be in place.