Bitcoin and gold were said to be driven by the same demand for alternative currencies. So why is the virtual currency doing so well when the precious metal is doing so poorly? An article by the Wall Street Journal (WSJ) said that different dynamics are at play in these two currencies.
Bitcoin's price, which was around USD14 at the start of the year, hit a record USD900. Its price has pulled back slightly since, but it still hovered around USD780, WSJ said.
Gold, another currency substitute, had a miserable year. Its price is down by more than a quarter since the start of the year. But in Bitcoin terms, gold's value has been shredded, according to the article.
WSJ said investors have been rushing into Bitcoin because it is a supra-national currency, beyond any one country's control and impervious to being inflated at a time when central banks are printing too much money. The same thing could also be said about gold, the report said. However, part of gold's problem was that it is no longer a hot investment as speculation has now shifted towards Bitcoin. And as speculative fervor fades, gold's fundamentals look less appealing, WSJ said.
An article by Market Watch said gold believers would argue that its price is being suppressed and manipulated by governments and central banks, who fear for their monopoly of paper money and their power. This would make all the difference. Unlike gold, Bitcoin's price is freely set and can't be manipulated. It is also not being suppressed, Market Watch said.
The article asserted that Bitcoin is, in many ways, a better alternative than gold; and its superiority is starting to become clear. Nonetheless, it was deduced that gold, which previously had the alternative currency market to itself, is now facing serious competition.
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