Bitcoin and Gold are both stores of value; however, as BTC is hitting a new all-time high every week, gold’s price is dropping.
Is it still correct to call Bitcoin “digital gold” when the real thing had been less valuable?
The gold-bitcoin ratio is now at an all-time low, this means that gold’s price related to BTC is now at its lowest point ever since Bitcoin has been created. It is mostly because of Bitcoin’s ongoing bull run. It now takes 29.63 ounces of gold to purchase a single Bitcoin. At the height of the previous bitcoin bull run, last December 2017, the number was only 14 ounces.
A store of value means that it can be held on to without depreciating its value. Gold, a precious metal that doesn’t decay is a classic store of value.
Investors look for currencies, metals, or some assets to serve as stores of value specifically at times when inflation is high or other markets are getting beaten. Dollars, even though they are subject to inflation, are solid if not spectacular store of value in a short term; last year, the inflation reached an estimated 0.62%.
But Bitcoin creates even more attractive returns than a fiat currency that promises to only depreciate a little every year. Data from Nomics showed that Bitcoin has increased in value by a gigantic 80% since February 2020 to its latest market price of $52,240, an all-time high.
At the same time, the price of gold is up by 12% – FROM $1,586 TO $1,776.
“Though both assets have their unique advantages and disadvantages, at this time it’s clear that the market is far more willing to hedge the upcoming period of inflation with bitcoin over gold.”
Mati Greenspan, founder and CEO of investment advisory group Quantum Economics
Given both assets’ historic volatility, the gold-Bitcoin ratio can rise back up. It doesn’t take much searching on the calendar to check that 1 Bitcoin could only buy 3.04 oz of gold on March 12, 2020, as the globe entered into a pandemic-induced financial crisis.
The kind of volatility is almost enough to yearn for the gold standard from the 1920s – when US dollars can be exchanged for gold at a price of $20.67 per ounce. But it looks like a new Bitcoin standard is more fun right now.
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