Has it started to happen, or is gold a better store of value?
Hopes of Bitcoin becoming credible slump with it's price
The OZ
By Simon Nixon
One of the boldest claims advanced to justify the remarkable rise in the value of bitcoin towards the end of last year was that the digital currency was set to rival gold as a long-term store of value.
Indeed, Goldman Sachs even cited these supposed inflation-proof qualities as justification for its eye-catching prediction at the end of last year that bitcoin could hit $US100,000 ($140,000) over the next five years. The investment bank noted that the cryptocurrency already accounted for 20 per cent of what it called the “store of value” market, comprising gold and bitcoin, and suggested that this could rise above 50 per cent.
That prediction has not survived its first contact with economic reality. As the world’s big economies grapple with the highest inflation in decades, the price of bitcoin has tumbled. It stands at $US37,563, more than 40 per cent below its November peak. Meanwhile, the price of gold is broadly unchanged since the start of the year, suggesting that bitcoin’s share of the “store of value” market is down to about 10 per cent.
It turns out that far from trading like gold, bitcoin has more in common with technology stocks, which similarly soared when central banks flooded markets with cheap money but have sunk at the first hint of a rate rise.
Indeed, the crypto boom has carried all the hallmarks of a bubble. The number of digital currencies has exploded in recent years, rising from 6000 to more than 11,000 last year. At its peak, the combined market capitalisation of the crypto universe was an estimated $US2.6 trillion.