As of today, end of November of 2020, the most popular cryptocurrency, Bitcoin, is about to surpass its all-time high of $19,783 reached in December 2017. What’s more, many are forecasting Bitcoin to reach $25,000 and even others bet for a price of $400,000.
Although Bitcoin started as an economic and technological experiment, with the revolutionary hope of decentralizing the issuance, transfer and record of money transactions that is performed by central banks and governments, Bitcoin didn’t have any value when it was born. Plus, it’s a completely digital currency.
On the other hand, gold has been part of every human culture and it has been praised because of all its physical and tangible attributes, so much so that it’s been part of all kinds of human interactions, from wars to its association to immortality. Societies and all world economies have placed value on gold: we trust it, it’s useful and it’s scarce enough to be a valuable commodity.
Comparing the history of gold with that of Bitcoin seems to not be fair. While gold has had millennia to build its value, bitcoin entered into existence just 10 years ago with no value and even only being a theoretical essay.
Bitcoin is the digital gold of today and it requires people to work mathematical calculations in order to create a new block and “extract” bitcoin. The bitcoin mining process rewards miners with a chunk of bitcoin upon successful verification of a block and it has a limited supply of 21 million of bitcoins.
In 10 years, around 18.5 million bitcoin have been mined, so there are only three million more coins to be extracted, but the process is more complicated than that.
Anyways, what’s important is that Bitcoin is seeing a big appreciation in recent years, and its value has soared only in what has transcurred of 2020, going from $6,483 to almost $20,000 and it’s expected to keep increasing in value.
A lot quicker than gold, Bitcoin adoption and acceptance is growing, and it is that’s the reason behind its price boost. Consumer-facing companies and Wall Street institutions like investment firms and financial institutions, with the world’s biggest financial power, have been starting to trust their assets into bitcoin and other cryptocurrencies.
Although bitcoin doesn’t have nearly the degree of institutional ties compared to gold, with the recent rally of Bitcoin, some of these financial institutions are, not only keeping an eye on bitcoin performance over time, but some of them are already investing in Bitcoin to replace their portfolio or to back up part of their financial assets. With economic constraints like the one we’re living in 2020 -I’m talking about Covid-19-, and other economical and political reverses like the US economic wars with China and other allies, the lost of value of traditional assets it’s beginning to be replaced for more decentralized and potentially trustworthy assets like cryptocurrencies due to their independence from the mentioned factors.
Other historically safe havens to store value like government bonds, the US dollar and, of course, gold, have lost a lot of their power and trust among its holders. No one wants to lose money, and what’s more, everybody wants to make profits.
Before it was gold. Now, despite the skepticism, bitcoin is on its way to become what it was expected to do from the beginning: be the new cornerstone (along with altcoins) of the economy. However, it’s still a long way until it replaces gold.
By Mickael Mosse, Crypto and Blockchain Advisor