Bitcoin vs. Gold: Stability and Adoption Are Key Comparison Elements

Comparisons between Bitcoin and gold have become as much a mainstream obsession as Bitcoin itself. However, despite the current decoupling of the two assets, the groups of interested and active investors in both are nearly identical, with overlap.

In fact, traders and analysts on Crypto Twitter have been researching both assets for over three years.

David Rosenberg, chief economist and strategist at Rosenberg Research & Associates Inc., is one of those analysts, and Rosenberg commented on this via a tweet on January 15, 2021. He thought about the comparisons between Bitcoin and gold and wondered if they were ridiculous? According to Rosenberg, no one is talking about the risk that the price of gold could fall to zero because it is impossible.

On the other hand, we may have passed the stage of discussing whether Bitcoin will reach zero value as early as 2013. As the number of Bitcoins produced drops by half every 4 years, its price will climb, and there will only be huge appreciation and vertical growth on the price chart, which is why the price has never dropped to half of the previous cycle.

Price trends in successive market cycles may be enough to justify price increases, but, contrary to what Rosenberg suggests, comparing Bitcoin to gold may not be completely absurd .

Despite the decoupling and similarities between the two assets, the comparison exists and cannot be denied, the comparison feels like a goal more than absurd. They made Bitcoin mainstream and drove adoption, in fact, one could say the entire narrative of “digital gold” is designed to drive real world adoption .

These comparisons do not require a price surge, so what is the added logic for traders following these narratives at different stages of the market cycle? In fact, the 70s gold trend has been popularized in the media, and it can be seen as an ideal benchmark for Bitcoin price rebounds, or another practical target.

Stability and increased adoption are key to making such comparisons. Compared to stocks and real estate, gold holders have given relatively high returns to a certain extent, and Bitcoin's risk-adjusted returns are better than other mainstream assets. As long as the risk-adjusted return is higher than other assets, Bitcoin will not fall to zero or close to zero.

However, if institutions start selling and exiting the stock in batches, that would be cause for alarm, but that is not happening yet, at least not on the charts. Judging from the current price charts and volumes on spot and derivatives exchanges, that seems unlikely to happen.

The comparison between the two assets will likely continue until Bitcoin’s expiration date and fourth halving, however, based on the current situation and narrative surrounding Bitcoin’s price rally, the impact on traders’ portfolios will be positive in the short term.

The original text comes from ambcrypto and was translated by Blockchain Knight. The English copyright belongs to the original author. Please contact the translator for Chinese reprint.