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Bitcoin Gold: A Rebellious Currency

Summary

Gold and Bitcoin gold are both independent currencies.

Both have no government control and have universal acceptance.

Bitcoin surges past gold and nears $8,000 after recent slump fades.

                   Source: Schaeffer's Investment Research

Gold is widely accepted by many as a legal currency in itself. It is where wealth is stored having a more tangible form unlike time deposit accounts. Physical currencies placed in time deposits are hidden only in bank vaults.

Bitcoin gold is being patterned after Bitcoin cash to become a further rebellious currency. A key objective of this new split from blockchain is to establish an improved protocol. Split details, however, are still in the process of shaping up.

Both gold and bitcoins are acceptable forms of money. Just like gold, Bitcoin is decentralized. There is no single entity such as a central bank that controls the supply of bitcoins. There is a fixed value for each of them.

Bitcoins have existed uncontrolled by government regulation. Despite current hype, new ICOs ((Initial Coin Offerings)) launches are still subject to meticulous investigations by conservative monetary regulators, especially in China.

On the contrary, Bitcoin offers the best freedom of asset ownership. No government can confiscate crypto-currencies from any owner. It did happen to gold when the US government confiscated gold from owners in 1933 under Executive Order 6102.

A few details were flaunted by Bitcoin gold developers with the aim of introducing this new mining to a bigger number of participants, replacing the existing mining algorithm of Bitcoin cash. Another tempting feature is to make it possible to mine bitcoins using graphic cards.

To date, there were already twenty wallets and exchanges committed to support Bitcoin gold once it launches. As an alternative currency, Bitcoin users find it the easiest way to retrieve Bitcoin gold via wallet or exchange that similarly supports Bitcoin gold.

Bitcoin Outpacing Gold:

There is one minor detail that differentiates gold and Bitcoin gold. Comparisons have only become more visible lately as bitcoin prices greatly surpassed gold.

According to the World Gold Council, total inventories of gold were estimated at six billion troy ounces. This volume is almost worth $7.3 trillion at current gold prices. Around 21 million bitcoins will be available by the time the supply of new bitcoins will last. Bitcoin supply is forecasted to last until year 2110. The total value of digital tokens will be shy of $39 billion in 2110, given current market prices.

Source: Bloomberg

A quick market analysis would show that one “digital coin” would have to trade at $347,000, in order for Bitcoin to be valued higher than gold.

It is like when analyzing a particular stock. Just because a company’s share price is higher than its peers does not necessarily mean that the market value of that company is convincingly worth higher. The company may have issued a fewer number of shares of stock.

The same thing happens with Bitcoin gold. Just because one Bitcoin gold is worth more than $1,500, its value is higher than the yellow metal? It is silly to compare them in that manner.

In terms of long-term prospects, Bitcoin gold is a lot like spot gold though. It is expected to shore up by 1,000% in year 2020. Analysts believe it is still nowhere a mainstream yet on the financial markets, despite Bitcoin prices have surged over the past few years.

Source: Bloomberg

Bitcoin prices have recently succumbed to violent volatility since its inception. The roller-coaster-like price ride has been greatly remorseful as prices pinned to all-time highs.

Analysts raised eyebrows upon discovering BTC prices overshot $1,200 and $1,400, then peaking at $2,800 before slumping down. It was seen touching the $8,000 threshold before another sky fall takes place.  That’s how volatile crypto-currencies are and it all happened in just a blink of an eye!

BTC long-term price trends are somewhat predictable. Prices will soar high fast enough - the moment that there will be a surprise announcement or excitement build up that bitcoins will soon be used as a unit of currency for an account.

It also triggers excitement and higher price points when there are news of wider acceptance of bitcoins as a payment method. If these market expectations fail, investor enthusiasm will immediately impact the price performance adversely.

The value of Bitcoin gold is gauged based on scarcity. As mentioned earlier, there are only limited inventories of digital coins out there. Unlike gold markets, the market for Bitcoin gold is far more speculative. Both are being mined. Bitcoins are mined by PCs. However, this time consuming process is murky to an average Bitcoin investor as well.

Recommendation:

Bitcoin gold may be the focus of attention right now. Yet, Bitcoin gold has a long way to go before it can be taken seriously as the precious metal gold. Precious metals like gold have a millennia-long track record of being a high value currency to investors. Gold is a tangible asset and it cannot be deleted from a digital ledger unlike bitcoins.

Countless comparisons were made between gold and bitcoins. They all boil down to gold and bitcoins being utilized as currencies for two different things. Bitcoin gold possesses a speculative value at the moment but it may gain a promising future someday, while physical gold being preciously rare is a long term store of wealth.