Gold or cryptocurrency? Who do I bet on? What’s the right future strategy?
The conversations around Bitcoin as the most popular cryptocurrency are never-ceasing lately. It has been referred to as the digital gold and everyone is talking about it now.
Let’s try to systematize the key messages observed around this crypto euphoria:
Bitcoins are limited in their technical capabilities, which hinders their widespread dissemination; A bitcoin is too volatile to be considered as a saving tool. It is simply unreliable.
Although gold changes its value too, it reflects the value of money unlike a Bitcoin, which is more of an asset supported by speculative capital flows.
As far as securing the real value of a Bitcoin is concerned, we can distinguish two main scenarios. It is believed that cryptocurrency is used to perform illegal transactions on the black market, and these transactions largely result in a conversion to cash. Moreover, it can be a tool for saving the value of money over time, despite the hyperinflation and national currency losing its purchasing power.
According to the Gresham’s Law: “the money overvalued artificially by the government will drive artificially undervalued money out of circulation”.
People will be more willing to spend fiat currency inclined to permanent depreciation but issued by the government, other than the decentralized cryptocurrencies.
The number of transactions in the Bitcoin operation is extremely low worldwide. It is caused by a large energy consumption, which in turn greatly complicates and makes it impossible to replace traditional money.
In addition, a high micropayment fee narrows its application scenarios to the medium and large transactions.
Just like all other cryptocurrencies, Bitcoin is uncontrollable and unpredictable; In addition to the speculative element, the cryptocurrency price consists of the mining costs, which tend to grow constantly (they can be predicted); This significant speculative component of the Bitcoin value (and any other currencies) is extremely susceptible to any negative news on regulating the market of cryptocurrencies/exchanges/exchange offices/ICO. Can Bitcoin replace the gold now? – I highly doubt it. I think that Bitcoin is still too much of a “niche” instrument. It has existed for a small period of time and its credibility is low, especially for those conservative investors, who look for a safe haven to preserve their savings in gold.
Bitcoin or any other cryptocurrency, or most probably the blockchain technology is the future! The birth of something similar in a rapidly growing digitalized world was inevitable and a matter of time.
I am confident that cryptocurrency is not a bubble. They are overvalued indeed, but that is rather caused by the hype around it. As soon as the hype goes down, the Bitcoin quotations can decrease (even though it can take some time).
The practice shows that destructive actions of regulators from world’s leading countries have a huge effect on this market and scare venture capital investors off. Because the demand for cryptocurrencies is connected with the lack of regulation by some digital financial democracy (ochlocracy).
I think that the future will be able to utilize the cryptocurrency: new rules of the game will be developed and their format will change.
As the time goes by, it is inevitable that the market of cryptocurrency, ICO, etc. becomes regulated one day.
It is perhaps another reason for its high demand, an attempt to jump on the train before global regulators find a way to control or even influence the digital decentralized financial world.
Bitcoin is the first cryptocurrency to already demonstrate some technical difficulties in use. New cryptocurrencies already become more perfect and I think there will be new crypto euphoria leaders with time. Well, let’s see, there is a lot more coming!