Amid declining public and market participant trust in central bank monetary policies and governmental meddling with the economy, the Bitcoin gold system could replace the agonizing remains of Bretton Woods.
Kristian Rouz The ongoing rally instocks, coupled withsubdued market volatility, suppressed international gold prices this week. This, combined withthe resurgence ofthe dollar, has produced bearish near-term expectations forgold amongparticipants ofconventional financial markets.
Gold prices eased 3 percent this week to $1,248.40/oz. way belowthe psychological threshold of $1,300/oz.
This is a result ofthe dollar rally, supported bybrighter GDP growth expectations inthe US, President Trumps tax reform and a declining demand forsafe havens amidinvestors.
However, gold the ultimate safe-haven asset is already being priced inBitcoin. The largest cryptocurrency has posted a stunning rise invalue this year, fromaround $1,000 per coin toabove $15,000. Now, Bitcoins accession toconventional financial markets might require some solid asset backing, aswild swings inBitcoins value still fend offsome investors.
READ MORE: Unstoppable: Bitcoin Price Passes $18,000 Milestone
Heres when the gold-against-Bitcoin trade steps in.
In many ways, gold and Bitcoin are similar types ofassets. Bitcoins value draws its main support fromits limited supply, asit requires an enormous computer processing capacity tocreate new coins. The global supply ofgold is rather tight aswell, asgold mining is very labor and investment intensive.
The marriage ofcryptocurrencies and gold enables alternative choices toholding more thanfiat currency, analysts ofthe Hutch Report wrote.
Although we cant imagine fiat currencies tobe replaced overnight, the promises ofgold backed cryptos do look compelling moving intothe future and they are certainly important tofollow.
Its a Gamble: Bitcoin Specialist on Ebbs and Flows of CryptocurrencyBoth Bitcoin and gold are currently traded againstthe dollar, and Bitcoingold pricing is not quite asubiquitous yet. However, the Bitcoindollar pair could eventually become the universal currency and payment system, rendering the institution ofcentral banking obsolete.
The price ofBitcoin gold tumbled below $250 againstthe dollar, mostly due tothe cryptocurrencys meteoric rise. Bitcoin has returned more than1,000 percent this year so far, butmost investors are still cautious, seeing it asan instrument ofspeculation.
Bitcoin is backed bythe markets trust inminers and blockchain technology, which is far frombeing solid. Also, Bitcoin does not enjoy central bank asset backing. Gold, however, could provide substantial backing toBitcoin inthe conventional markets, byeliminating risks ofhigh volatility and making it easy tocash outof the cryptocurrency.
READ MORE: What Was That? Bitcoin Loses Fifth ofIts Value, Bounces Back Within 24 Hours
The principle strengths ofthe gold exchanges based onthe blockchain is that they are being developed byreputable organizations, the Hutch Report said.
Earlier this month, US regulators allowed Bitcoin trading onthe Chicago Board Options Exchange (CBOE). The cryptocurrency will be priced againstthe dollar. Meanwhile, Chinese regulators are expected toallow its largest Bitcoin exchange toresume operations inthe second week ofDecember.
Some investors and traders are concerned aboutthe demand forgold, which might decrease if Bitcoin gains a greater prominence inthe conventional financial markets. Last month, the number ofinternet searches for buy bitcoin had exceeded searches for buy gold forthe first time inhistory.
Digital Gold: Top 5 Cryptocurrencies to Watch Out For Besides BitcoinWhile the dollar remains the universal method ofsettlements, both gold and Bitcoin find themselves ata disadvantage. A gold trade indollars resembles a regular commodity trade, witha flavor ofluxury toit. Bitcoin is very volatile because investors believe central bank asset backing is crucial fora currency tobe sustainable.
However, the price ofBitcoin gold has proven far less volatile inrecent months, whilst being fully determined byopen-market fluctuations. Bitcoin gold pricing is also not susceptible togovernmental and central bank interference.
Ventures withthe strongest management teams look tobe the most compelling. For this reason the exchanges; Bankchain Precious Metals, Goldmoney, The Royal Mint and Tradewind, look solid. Among the gold backed cryptocurrencies, we will be followingthe launch ofBullionCoin, the Hutch Report observed.
This suggests the price ofBitcoin gold could provide a solid foundation tointernational trade and economic growth if it becomes the new global regime ofsettlements replacing the dollar and other fiat currencies.
The views and opinions expressed in the article do not necessarily reflect those of Sputnik.
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