Bitcoin market value reaches $1.9 trillion
As Bitcoin continues to hit new highs, its market value has reached $1.9 trillion, ranking 7th among global assets, surpassing Saudi Aramco, silver, and Facebook's parent company Meta. Gold, on the other hand, remains the market leader with a market value of $17.874 trillion, about 9.4 times that of Bitcoin.Similarities between Bitcoin and gold
The price correlation between Bitcoin and gold is a complex and variable topic. The main common features between the two are: - Hedge assets: Both Bitcoin and gold are seen as hedge assets, especially during increased economic uncertainty. Investors often turn to these assets to protect their wealth or hedge against inflation. - Scarcity: Both have scarcity. The supply of gold is limited, and the total supply of Bitcoin is capped at 21 million. However, the price trends of the two are not interdependent. According to data from newhedge, the 30-day rolling correlation between Bitcoin and gold fluctuates between positive and negative (marked by the yellow line as the zero axis), sometimes showing a positive correlation and sometimes a negative correlation.Significant rise in Bitcoin/gold prices
Looking at the trend of Bitcoin divided by the spot gold (XAU) price, the Bitcoin/gold ratio (BTC/XAU) has risen sharply from around 9 in 2023 to a recent 37, indicating that Bitcoin's price has risen significantly more than gold in recent years. The sharp rise in the Bitcoin/gold ratio in the past month also reflects the speculative buying in the Trump effect, causing the hedge gold to fall, while Bitcoin continues to hit new highs. Gold has risen 28% so far this year, the same as the US S&P index, and far outperforming many major national indices, but Bitcoin has risen 131% so far this year.Will Bitcoin become part of the national foreign exchange reserves?
Whether Bitcoin has the opportunity to become a national reserve asset is still a controversial topic. Previously, crypto-friendly Senator Cynthia Lummis proposed the "2024 Bitcoin Reserve Act", hoping to use Bitcoin to manage the US national debt. The bill proposes to establish a strategic Bitcoin reserve and store it in secure vaults across the country. (Republican Senator Lummis proposes a Bitcoin strategic reserve bill: the US will accumulate 1 million Bitcoins within five years to solve the national debt)Russia, which has been excluded from SWIFT and sanctioned by the United States and Western countries, has recently stated that cryptocurrencies such as Bit may become a better alternative to foreign exchange reserves, and no one can stop Bit. As Russia's foreign exchange reserves are gradually frozen by Western countries, Russia is actively turning to digital asset reserves.
Will Bit Have the Opportunity to Replace Gold as a National Reserve?
According to the global gold reserve ratio statistics of the major economies compiled by Financial M Square, the gold reserve assets of the world's major countries have reached $2.3 trillion, accounting for 15% of the total reserve assets, while the foreign exchange reserves dominated by the US dollar account for 78%.
Arguments Supporting Bit Replacing Gold as a National Reserve
The arguments supporting Bit replacing gold as a national reserve include:
- Bit is digital gold: Some analysts and investors believe that Bit has similar hedging properties to gold, and in the digital age, Bit may become a new means of value storage
- Scarcity: The total supply of Bit is limited to 21 million, and this scarcity is similar to gold, which may attract more countries to include it in their reserve assets
- Technological advantages: Bit is based on Block chain technology, with features of transparency and decentralization, which may make it more attractive than gold in certain situations
Arguments Against Bit as a National Reserve
The opposing arguments may include:
- Volatility: The price volatility of Bit is much higher than that of gold, which calls into question its stability as a reserve asset
- Regulatory risks: The regulatory policies of various countries on cryptocurrencies are still unclear, which increases the risks of Bit as a national reserve asset
- Market acceptance: Currently, gold has far higher acceptance and trust in the global financial market than Bit, which poses a huge challenge for Bit to replace gold
Interestingly, the United States has not bought gold as a reserve asset for decades. And if the United States were to use Bit as a reserve, the regulatory issue would be the biggest hurdle to overcome. Recently, gold bull Peter Schiff stated that Bit may ultimately destroy the US dollar - not because it replaces the US dollar as the global reserve currency, but because the US government embraces Bit, prints trillions of dollars to buy it, and fuels an even bigger bubble, wasting the country's resources.
Will Bit Become a Tool for De-Dollarization?
Is it possible that Bit is not replacing gold, but replacing the US dollar as a national reserve, becoming a tool and means for de-dollarization?
Observing the global official foreign exchange reserve currency share in recent years, the US dollar has gradually declined from 70% in 2000 to 58% this year, and the US's occasional use of sanctions has kept the issue of de-dollarization on the agenda.
According to previous reports, the BRICS group consisting of Brazil, Russia, India, China and South Africa is working to create a payment system based on Block chain and digital technology, and continues to reduce its dependence on US dollar settlement. The BRICS group has also expanded this year to include Iran, the United Arab Emirates, Ethiopia and Egypt.
Russian President Vladimir Putin is an advocate for weakening the international status of the US dollar, mainly because Russia has been banned from using SWIFT for international money transfers and other economic sanctions due to the Russia-Ukraine war. If developing countries use Bit as a foreign exchange reserve or even adopt Bit as legal tender like El Salvador, to combat high domestic inflation and the sharp devaluation of their own currencies, as long as they have a strongman like El Salvador President Nayib Bukele, it may not be an impossible way.
However, the recently appointed Trump has warned the BRICS countries that he will demand that they promise not to create new currencies to replace the US dollar, and threaten them with a 100% tariff. If they don't create new currencies but use the existing Bit to replace it, I wonder how President Trump will react.
