Gold vs Bitcoin: The Contrarian Case for BTC
Gold and Bitcoin prices have diverged in 2022. Bitcoin price has collapsed more than 60% so far this year, while gold is close to where it started the year. Over the past five years, gold has risen by around 43% while BTC has crashed by around 11%. So, what is a better buy between gold vs Bitcoin?
Gold vs Bitcoin
The gold price has done modestly well in 2022. After falling to a low of $1,620 in September, the gold price has recovered to around $1,800. Nevertheless, it is still 12.6% below the highest level this year. To a large extent, gold has followed the development of US stocks.
The Bitcoin price, on the other hand, has been in freefall, as it has erased most of the Covid gains. It has plunged from a high of $67,000 to a low of $15,000.
Bitcoin is dealing with a collapse of confidence in cryptocurrencies following several catastrophic events in the industry. For example, Terra’s ecosystem collapsed in May, causing over $40 billion in losses. Three Arrows Capital, a hedge fund closed shop.
The latest confidence killer is the collapse of FTX and Alameda Research. As a result, many investors have either sold their BTC or moved them to private wallets in record numbers.
Why Bitcoin is still better than gold
Bitcoin price collapse has invalidated one of the top thesis about the coin. For a long time, Bitcoin supporters have argued that Bitcoin is a good hedge against inflation. That has been untrue since BTC collapsed during a period when global inflation rose to a multi-decade high.
Still, there are several reasons why Bitcoin appears to be a better investment than gold. First, the recent panic over FTX is actually a good thing for Bitcoin and other cryptocurrencies. That’s because Sam Bankman-Fried was actually running a scam.
In his recent interviews, he has said that FTX made funds with Alameda Research, which is illegal. As such, the sooner FTX collapses, the better it is for the crypto ecosystem.
Find out how to buy Bitcoin.
Crypto regulations
Furthermore, as I wrote on Friday, the collapse of FTX will likely lead to sensible regulations in the crypto industry. I believe that crypto companies can be regulated the same way Wall Street banks are regulated. This could include regular stress tests and better disclosures.
Finally, the Bitcoin price has proven that it can recover from major falls. Over the last decade, BTC has had several 60%+ withdrawals and it always recovers. It has also proven that it can go parabolic under the right conditions.
Gold, on the other hand, tends to have minimal gains. Between 1999 and now it has risen by less than 600%. Bitcoin, on the other hand, is up over 7,620% from its 2015 low.
In addition, such crashes happen all the time when there is a big shift. For example, most technology stocks collapsed in 2000 when the dot com bubble burst. Nevertheless, many quality companies such as Amazon and Alphabet thrived.
