Bitcoin’s first evident challenge for gold’s throne came when the prevailing cryptocurrency surged from under $1,000 to generally $20,000 in late 2017. In the meantime, gold was stagnating around $1,200 per ounce — causing nearly everyone associated with the precious metal to start making some new considerations.
Pete Thomas, senior VP of Zaner Precious Metals, was one such expert who saw the impact Bitcoin had on gold, disclosing to CNBC that some of his consistent clients were picking Bitcoin over the yellow shake — a marvel that was noticed throughout the precious metals industry.
Thomas clarified that one of his long-term customers, a noteworthy worldwide coin merchant, also saw an adjustment in the tides saying, “He told us that 20 percent of his business was now crypto. People were going to a gold broker and swapping crypto out or swapping gold to buy crypto with him. He’s a real numbers guy and really reliable”.
Not every person is persuaded that Bitcoin will oust gold, obviously. Joe Foster, portfolio director and strategist for the gold and valuable metals methodology at VanEck, which offers the VanEck Vectors Gold Miner ETF (GDX) and the VanEck Vectors Junior Gold Miners ETF (GDXJ), does not trust that financial specialists were really exchanging gold and Bitcoin amid a last year’s bull run.
Speaking to CNBC Foster noted that “There was no trading data cited. I never even saw an interview of anybody saying that I sold my gold to buy Bitcoin. To me, it was all just rampant speculation that because Bitcoin is going up and gold has more or less been trending sideways, people must be going out of gold and buying Bitcoin”.
Foster also guarantees that substituting gold for Bitcoin would be just preposterous, clarifying:
“For centuries, gold has been a safe haven store of wealth. In today’s economy, gold is used as a hedge against systemic financial risk. And I don’t see how anybody in their right mind would think Bitcoin is any kind of a hedge against financial risk given the volatility, given the fact it’s got a very short history”.
While many debate the relationship between Bitcoin and gold, the inquiry may continue regardless of whether there is any need to compare the two.
The World Gold Council does not see the relationship between Bitcoin and gold as shown in a report it released back in January in which it noted that “Cryptocurrencies may become an established part of the financial system. But, in our view, gold is very different from cryptocurrencies, as gold: is less volatile, has a more liquid market, trades in an established regulatory framework, has a well understood role in an investment portfolio, [and] has little overlap with cryptocurrencies on many sources of demand and supply”.
Nevertheless, considering the realities on the ground, not even the World Gold Council could deny Bitcoin’s undermining capacities.