Stop Comparing Bitcoin To Gold, It's No Contest - World Gold Council
(Kitco News) - Bitcoin and cryptocurrencies should not be considered asubstitute for gold, according to the World Gold Council.
In a report published Thursday, the WGC said that goldpossesses several characteristics that differentiate it from digitalcurrencies. The most notable factor is that cryptocurrencies have yet to provetheir worth as a strategic component to a portfolio, unlike gold.
“Gold is a tried and tested effective investment tool inportfolios,” the report said, “it has been a source of returns rivalling thatof the stock market over various time horizons; it has performed well duringperiods of inflation; it has been a highly liquid, established market; and it hasacted as an important portfolio diversifier, exemplifying negative correlationto the market during downturns.”
On the contrary, cryptocurrencies have not accrued a trackrecord in multiple market conditions; bitcoin has, since its inception,operated during the second longest bull market in the S&P 500’s history,which has seen very low volatility.
“The crypto-market is young, and liquidity is scarce,” theanalyst at the World Gold Council said, “its price behavior at this point,while still attractive to many investors, seems to be driven by high returnexpectations.”
Gold has appreciated 10% per year, on average, since the1970s, while bitcoin rose 1,300% in 2017 alone.
The report stated that bitcoin’s high volatility also setsit apart from traditional safe havens like gold, and further disqualifies thedigital coin as a legitimate currency.
“While [high volatility] is good for investors looking forextremely high investment returns, it is hardly a characteristic of a currency,let alone a store of value, potentially limiting bitcoin’s use as a transactiontoken,” the report said.
Despite its parabolic rise in recent years, the world’slargest cryptocurrency has fallen more than 40% since its mid-December 2017highs, a correction that gave bitcoin a volatility level that is nearly as highas the “realized volatility of the VIX itself.”
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