Future Appreciation Rates of Gold and Bitcoin Could be Similar
Bitcoin has often been compared to gold for its properties as a store of value. Just like gold, BTC is not tied to any central controlling entity and serves as a hedge against state manipulation of fiat currencies. Unlike gold, however, Bitcoin is still very volatile but that could all change in the future.
Steady Appreciation for Bitcoin and Gold
BTC, or digital gold as it is often termed, has been anything but steady over the past few years. In 2018 it dumped over 80% while in 2019 so far, Bitcoin has gained over 160%. Extrapolating the all-time chart for Bitcoin’s decade long history shows a parabolic curve of its price taking into account these large market cycles.
The golden commodity price chart displays a similar but far shallower curve as its price has steadily increased since the 1970s. Crypto trader ‘dave the wave’ has overlaid the two parabolas which reveal an interesting pattern to come if the scenarios both play out and the curves continue on their current paths.
Give it a few years, and gold and BTC might be appreciating at the same rate. pic.twitter.com/KEbO5vENkE
— dave the wave (@davthewave) August 16, 2019
Both gold and Bitcoin are expected to significantly increase in value with one accelerating and the other decreasing in gains over time. After the intersection of the two parabolic lines, which occurred about 18 months ago according to that chart, the two appear to increase at similar rates.
From around 2025 to around 2040 the two assets could be appreciating at a very similar rate with a possibility of Bitcoin prices being fixed to gold. This is of course assuming that there has been enough BTC adoption and usage for its volatility to decrease, while investment into gold continues to increase over time. The representation that followed was with gold prices multiplied by 400.
“This represents a bar of gold which puts gold on an equal footing with BTC in terms of scarcity. And this ratio would also roughly hold in terms of overall market cap. Doubt that BTC will reach gold’s market cap.”
More pertinently, he added;
“I think the main driver of price is the *capitalization* of something that is perceived as scarce.”
Currently Bitcoin is outperforming nearly all traditional assets, gold included. This year alone gold has increased by 18 percent from $41,100/kg to $48,546/kg at today’s prices according to goldprice.org. Bitcoin conversely has surged 166 percent from $3,750 to $10,000 over the same period.
Both are being accumulated on the perception of scarcity and both are being held for similar motives. There is no reason that this is likely to change in the future as economic tensions escalate while the world’s superpowers keep devaluing their currencies in order to ‘out trade’ each other.
Image from Shutterstock
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Martin Young, Khareem Sudlow