• 토요일, 10월 24일
토요일, 10월 24일

[Opinion] Is Bitcoin the new gold?

[Opinion] Is Bitcoin the new gold?

Graphic=Coindesk.com

[Newsphopick=Kingsley Lim] For a moment, I thought that all the hype around cryptocurrencies were dying down. For a couple of years, the new-school security, aptly called a cryptocurrency, had seen its price sky rocketing to levels not seen in human history. When Bitcoin was first launched by Satoshi Nakamoto, it was conceptualised as a decentralised blockchain-based network.

From a couple of cents per coin, the coin’s price eventually reached a value of US$20,000. Just think about that for a moment. A coin, which is virtual, had a value of US$20,000. This huge price spike over many years of Bitcoin’s life has made created many millionaires. An example of that is Roger Ver, who is also known as ‘Bitcoin Jesus’. Roger Ver is not just an investor in Bitcoin, but he is also an advocate. 

In 2011, the investor purchased US$25,000 worth of Bitcoin. Then, Bitcoin was in its infancy and sold for really cheap prices, probably at around a few dollars per coin. Today, his stash is worth US$425 million. What an amazing run that Roger has had and it does go to show that a little luck in investing does not hurt. Also, bear in mind that Ver purchased Bitcoin when no one believed in the story.

The Bitcoin story, while seemingly speculative, does have an interesting angle to it. And the truth of the matter is that really smart investors are jumping on the bandwagon as well. Since Bitcoin is a decentralised blockchain ledger, it is a real-time recorder of all transactions and information, acting like the ‘eyes of God’.

There is a theory that the money in the bank is not necessarily yours. For one, the tax authorities could dip their hands into our bank accounts and take away parts of it. Also, when black swans occur, our financial systems could collapse and render these currencies useless. When that happens, it is not too hard to fathom that depositors will not be able to withdrawn the cash. It has happened before in 1929 during the Great Depression. In all likelihood, it will probably happen again.

With an increasing amount of money in the system through inflation, tradition fiat currency may not be the best store of value. Hence, many have turned to gold as a hedge against inflation and a potential recession.

But the younger crowd especially the millennials have been very open with cryptocurrency as an investment. Since information is recorded on a decentralised blockchain, Bitcoin always belongs to the owner that owns it. At the same time, the blockchain is protected by cryptography. According to some experts, it is nearly impossible to hack into the Bitcoin blockchain network as you have millions of computers and servers, serving up and verifying information for a fee.

As such, many have come to regard Bitcoin as the new gold. In fact, some might argue that Bitcoin as a currency has more value than gold itself. That is because the supply of Bitcoin is scarce and limited. There will only ever be approximately 21 million Bitcoins in existence and that is a fact that will not change for it was designed that way by Satoshi Nakamoto.

Quite recently, while the price of gold was rising due to fears of an impending crash in the stock market, Bitcoin’s price has also risen. If Bitcoin was a useless asset, why would people push the price of Bitcoin up as the coronavirus pandemic ravages the global economy? That is perhaps something to think about.

But because the markets have come to see Bitcoin as an alternative asset or currency to the financial system, Bitcoin is quickly becoming adopted by the masses. It is no longer just an asset that one invests in. It is currency itself. It is not uncommon to see users purchase coffee or pizza at a technology conference where cryptocurrency enthusiasts congregate.

While some may say that it is speculators driving up the price of Bitcoin during Covid-19, there is more to it than meets the eye. A hedge fund manager by the name of Michael Novogratz, who runs Fortress Investment Group has been advocate of Bitcoin for a while now.

“My sense is that Bitcoin way outperforms gold, but I would tell people to have a lot less bitcoin than they have gold, just because of the volatility,” said Novogratz as he suggested that may be a better performer than gold.

He added “Bitcoin is still hard to buy. If it was easier to buy, it would be a lot higher. And there are more and more people making it easier to buy: funds being set up, custodies being done, at one point we’ll get an ETF.”

For what it is worth, many see Bitcoin as a call option on the destruction of the financial system and the worlds’ governments. In the event that Covid-19 gets out of control and mutiny becomes widespread, Bitcoin may be the asset to own in such an instance.

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