Bitcoin has hit a new record high above $64,000 (£46,700). But while bitcoin has more than doubled this year, gold has disappointed, notes John Authers on Bloomberg. That’s odd given the “historic amount of money printing” and talk of coming inflation. Dhaval Joshi of BCA Research thinks bitcoin has stolen gold’s thunder by emerging as a new “anti-fiat” asset: investors looking for protection against inflation increasingly turn to digital currencies. “Circumstantial” evidence suggests that some of the money that big investment institutions have pulled out of gold since last November may have flowed into the cryptocurrency. Yet bitcoin’s high volatility and periodic crushing losses are hardly the hallmarks of a store of value.
Bitcoin’s $1trn market cap is still smaller than the $2.5trn of privately held gold, says Daren Fonda in Barron’s. Bitcoin would have to hit $146,000 for the market capitalisation to match that of gold. But will governments really tolerate a “freewheeling digital token” that undermines their own currencies? China has already stopped banks from making transactions in bitcoin and closed down crypto-exchanges, while India is contemplating an outright ban. Stock prices ultimately depend on earnings and gold has applications in manufacturing and jewellery. Yet bitcoin’s value is purely speculative: as long as people believe it can one day supplant the dollar or gold they will keep on buying.
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