Bitcoin vs gold: store of value debate intensifies with ETF roll-out

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Bitcoin’s new all-time high and the approval of BTC ETFs act­ed as a major step­ping stone for gen­er­al adop­tion. In fact, it also cat­a­pult­ed Bitcoin’s store of val­ue narrative. 

The store of value race

For quite some time now Bit­coin has been called dig­i­tal gold. How­ev­er, the argu­ments for and against the notion are equal­ly preva­lent since the nar­ra­tive hasn’t com­plete­ly played out yet. Nonethe­less, with BTC con­tin­u­ous­ly above the $60K mark, many argue that Bit­coin in fact is ‘bet­ter at being gold than gold itself.’ 

Despite the volatil­i­ty, the king coin con­tin­ues to draw inter­est from investors for its long-term record of build­ing and main­tain­ing val­ue. In fact, this cycle saw the aggre­gate Bit­coin bal­ances on the exchanges on a major down­trend. The cur­rent exchange bal­ance lev­els are equiv­a­lent to the Sep­tem­ber 2018 levels. 

Source: Glassnode

Fur­ther, with new address­es going up, out­flows peak­ing, and rel­a­tive­ly low volatil­i­ty shown by price, BTC com­fort­ably rest­ed above $60K. The mar­ket seemed to be flood­ed with pos­i­tive sup­ply shock nar­ra­tives. But, the impor­tant ques­tion is what gave BTC the upper hand when it came to the store of val­ue fight.

BTC has the upper hand 

The num­ber one rea­son peo­ple start­ed buy­ing gold was the real yield, but investors might be tilt­ing towards Bit­coin as a replace­ment. Right now Gold’s real yield not­ed 4% which was the low­est it has been for more than a decade. If the real yield is neg­a­tive then basi­cal­ly you are pay­ing for the priv­i­lege of tak­ing someone’s risk. 

While gen­er­al­ly, when the real yield dips into neg­a­tive ter­ri­to­ry it’s a trig­ger for run-ups in gold, this time how­ev­er the same wasn’t seen. 

Now, there are spec­u­la­tions that one rea­son behind this neg­a­tive real yield could be that mon­ey inflows are being stolen away from Gold, but are they going into BTC? There are some fac­tors that point towards it. 

First­ly, the evo­lu­tion of the mar­ket cap of Bit­coin expressed as a per­cent­age of the mar­ket size of phys­i­cal gold shows that BTC is skyrocketing. 

Bit­coin went from less than 1% of the mar­ket size of gold to 2.5% four years lat­er and now stands at a stag­ger­ing 12%. At the moment it does seem like BTC is prob­a­bly just steal­ing some cash that would tra­di­tion­al­ly go to gold, but the dynam­ics could be much dif­fer­ent in some time. 

Addi­tion­al­ly, BTC’s built-in scarci­ty along with its stark sim­i­lar­i­ty to the 90s dot-com bub­ble makes the nar­ra­tive for BTC stronger. 

For now, BTC still has a long way to go. Despite a world of dif­fer­ence keep­ing gold investors and Bit­coin traders apart, per­haps both can share parts of an anti-fiat philosophy. 

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