Author: Mu Mu
Recently, Bitcoin has been fluctuating near the $100,000 mark, and finally broke through this important "psychological" mark of $100,000 today. In fact, the recent crazy rise of Bitcoin has already surpassed the equally sharp rise of gold. Perhaps just as some countries, including the United States, have successively proposed to use Bitcoin as a strategic reserve, the corner of gold has already been dug open by Bitcoin:
10 years ago (December 2014), gold was 250 yuan/gram, 10 years later, 630 yuan/gram, 2.5 times in 10 years
10 years ago (December 2014), Bitcoin was $360/coin, 10 years later, $100,000/coin, 277 times in 10 years
A few years ago, when someone first proposed the concept of "digital gold", almost everyone would give a suspicious look at the scammer whenever it was mentioned. However, 10 years have passed, and Bitcoin is growing at an amazing speed, so that today's Bitcoin has finally begun to shake the unbreakable position of gold for thousands of years...
Gold VS Digital Gold Bitcoin
The reason why Bitcoin is called digital gold is that it has some characteristics similar to gold, but many people still find it difficult to associate physical and virtual assets. Perhaps we should start with the background of Bitcoin's birth...
1) The background of Bitcoin's birth
Thousands of years ago (the exact date is uncertain), gold had already become a "hard currency". As a currency, it has been recorded as early as the Spring and Autumn period more than 2,000 years ago, and has been used ever since. People hold and use gold without any restrictions from any person, institution, or even country, truly achieving "inviolability of private property".
Historical records show that in 1717, Sir Isaac Newton of Britain first proposed the gold standard (a monetary system based on the gold standard, with the country's gold holdings determining the amount of currency issued and the exchange rate), and subsequently many countries around the world gradually adopted it. Until 1971, U.S. Secretary of State Kissinger announced a plan to abandon the gold standard, and the currencies of the United States and other countries were no longer dominated by gold, meaning that the value of currencies was no longer limited by gold reserves. This means that the modern monetary system can be adjusted as needed to devalue and control inflation.
Later, in 2008, the global financial crisis, the United States printed a large amount of money to rescue banks, and the public found that the money in their pockets was forced to be diluted, which caused strong dissatisfaction and distrust of the financial system, leaving some textual clues for Satoshi Nakamoto's original intention to establish Bitcoin.
This is also why Satoshi Nakamoto left this sentence on the Genesis Block of Bitcoin, "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks".
The traces of messages left by Satoshi Nakamoto before his sudden disappearance make many people believe that Bitcoin is a response to the 2007-2008 financial crisis events. On the message board of the P2P Foundation, Satoshi Nakamoto wrote an article in February 2009 introducing Bitcoin.
In the article, they expressed distrust of central banks and concerns about assets: "We have to trust banks to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible."
2) What are the specific similarities between gold and Bitcoin?
A. Decentralization
Gold: Natural resources scattered around the earth, anyone can dig up gold mines from some corner
Bitcoin: The global public blockchain with nodes scattered around the world has become a resource that anyone can participate in mining
B. Mining
Gold: Gold mining requires workers, mines, equipment, and electricity
Bitcoin: Bitcoin mining also requires block producers, mines, equipment, and electricity
C. Scarcity
Gold: A non-renewable natural resource
Bitcoin: The upper limit is 21 million
D. Durability
Gold: Physically stable and never rusts
Bitcoin: The network is strong and secure, and the data on the chain will never be erased
E. Anti-counterfeiting
Gold: Real gold can withstand fire
Bitcoin: It is impossible to tamper with even with millions of dollars invested
But to be honest, while they are very similar in some aspects, digital gold still has many advantages that physical gold cannot match, such as:
Bitcoin is very convenient to carry, just remember a string of words, while physical gold is especially heavy;
Bitcoin can be verified for anti-counterfeiting at any time and anywhere, while physical gold is easy to be counterfeited with similar-density metals (in recent years, there have been frequent cases of gold jewelry adulteration);
Bitcoin is easier to divide and transact, while gold is the opposite;
Bitcoin can often have transactions worth hundreds of millions of dollars on the chain, but the transaction fee is only tens of dollars, while even the modern banking system finds it difficult to achieve such low-cost and fast asset transfers.
Bitcoin Has Dug Open the Corner of Gold
1) Grayscale has launched ads several times to suggest replacing gold with Bitcoin
Grayscale launched its first "Drop Gold" campaign on May 1, 2019, releasing ads with the theme of "Drop Gold", reminding people that it's time to replace gold with Bitcoin.
In 2020, Grayscale and Barry Silbert, the founder of the blockchain venture capital firm DCG, tweeted that Grayscale had re-launched the anti-gold ad "Drop Gold", and the ad is now being aired on all major U.S. networks. This is a marketing campaign for Bitcoin, the video suggests that "digital currencies like Bitcoin are the trend of the future", aiming to make Bitcoin a tool for value storage in the 21st century.
In fact, the Grayscale ads from a few years ago were largely ignored by most people, including some financial institutions. At that time, some financial tycoons even sneered at it, like the famous BlackRock CEO Larry Fink, who once said that Bitcoin was worthless! However, just recently, Larry Fink changed his mind, saying: BTC will disrupt traditional finance.
Now, BlackRock has become a Bitcoin whale holding nearly 500,000 BTC.
2) Spot ETF funds are flowing in rapidly
As early as 2020, JPMorgan Chase, the bank with the largest balance sheet in the United States, issued a report studying the successful case of the Grayscale Bitcoin Trust (GBTC), which was once one of the biggest critics of Bitcoin, but the report acknowledged that the demand for Bitcoin is even affecting mature markets.
JPMorgan Chase pointed out that the demand for Bitcoin may erode the demand for gold ETFs. According to this research, the number of people flowing into the Grayscale Bitcoin Trust in October 2023 is significantly higher than that of gold ETFs. Therefore, this U.S. bank concluded that GBTC may be able to capture some of the gold ETF market share.
coinglass: The current total market value of BTC ETFs has exceeded $110 billion
As expected, after the launch of the Bitcoin spot ETF, it has attracted a large influx of funds, while the gold ETF has seen a significant outflow of funds. Many financial commentators have pointed out that this is not a coincidence, as the Bitcoin spot ETF has "absorbed" a large amount of money, a significant portion of which has come from the gold ETF. Recently, there were media reports that BlackRock's IBIT's assets under management have surpassed the largest silver ETF, and BlackRock now holds more than 500,000 BTC, far exceeding the largest silver ETF.
3) Bitcoin ranks in the Top 10 global asset market cap
As of December 5, according to the global asset ranking list from Companiesmarketcap, Bitcoin, with a market cap of $2 trillion, has surpassed silver and ranks 7th in the global asset market cap. Currently, Bitcoin's market cap has also surpassed the total market cap of the world's four largest banks.
Top 10 global asset ranking, source: Companiesmarketcap
Bitcoin is still about 7 times away from the $15 trillion market cap of gold, but for many in the crypto asset circle, this may not be a very difficult task given Bitcoin's 277-fold growth in 10 years.
Recently, Anthony Scaramucci, CEO of Skybridge Capital and a veteran hedge fund manager, stated that Bitcoin's market cap will ultimately surpass the $16 trillion market cap of gold. In an interview with CNBC, the founder of SkyBridge Capital said that Bitcoin is the highest-quality asset the world has ever seen in the past 5,000 years of human history.
Scaramucci said that Bitcoin still has a long way to go to reach gold's $16 trillion market cap, but he believes that as regulatory authorities approve BTC ETFs, the gap will narrow over time.
4) Bitcoin is playing a "safe haven" role
Most of the time, gold in many people's portfolios is actually a hedge against inflation risk, which can also serve as a performance of a safe-haven asset. However, the fact is that gold has not outperformed inflation for most of the time. But Bitcoin, which has been breaking new highs, has a fixed supply chain, and a 4-year halving, seems to have never let anyone down in this regard.
Due to the general consensus, gold has very low volatility, while Bitcoin is exactly the opposite, so Bitcoin has higher growth potential, but also has to bear higher risks. However, the volatility of Bitcoin is gradually decreasing, and Bitcoin is truly becoming a viable "safe haven tool" for high-inflation countries...
Recently, a new report from the International Monetary Fund (IMF) titled "A Primer on Bitcoin Cross-Border Flows" pointed out that BTC has become a necessary financial tool for preserving wealth in the event of financial instability, and the analysis also pointed out that on-chain Bitcoin transactions recorded on the blockchain and providing higher security are often larger than off-chain transactions. This indicates that the powerful security features of blockchain technology often protect larger financial interests.
The report's author said that Bitcoin transactions provide individuals in high-inflation countries with a way to save stably and participate in global commerce in a way that is not possible with local currency.
From another perspective, when "missing the pump" is also seen as a kind of "risk", many investors add the "alternative asset" Bitcoin to their portfolios, often with the consideration of hoping to hedge against the risk of not being able to board the future Web3 technology and missing out on crypto assets.
When the crypto market is in a downturn, some people choose to exchange their high-risk Altcoins for the more stable and lower-risk Bitcoin, both to cut losses and reduce risk, and to avoid the risk of missing the pump. Therefore, Bitcoin is also often used to hedge against the high risk brought by Altcoin assets.
Summary
In fact, it is not surprising that Bitcoin is gradually eroding the market share of gold, the relationship between "digital gold" and "gold" is like the relationship between "digital payment" and "paper currency". As the times progress, the usage rate of paper currency is decreasing, and the ancient gold may not be able to meet the needs of everyone, so Bitcoin has filled this gap. As for whether Bitcoin can gradually surpass gold, that remains to be seen over time.
