Bitcoin vs Gold: Is Bitcoin really a new “safe haven” asset?

Foreword: What is the future role of Bitcoin? Can it be stored as value? Is it only stored as value? There is a lot of debate in the community. So, can it be understood as “digital gold” from the perspective of value storage? Even with this, everyone has a very different view. Some people think that after the recent macro-level test, Bitcoin does not show the characteristics of a "safe haven" asset, and bitcoin is not "digital gold." The author of this article believes that Bitcoin has shown signs of value storage similar to gold's original, and because of everyone's different views, there is a cognitive dividend period. Of course, investment is risky, especially the status of Bitcoin is not fully recognized. Opportunities and risks are always with you, and you must make your own decisions. The writer is Matt Hougan, translated by Nahong of the Blue Fox Notes community.

Is Bitcoin a new digital gold? This is a problem in many people's minds recently.

Is Bitcoin the new gold? Yes…but it was gold about 1973. (Photo by Ulrich Baumgarten via Getty Images)

Last weekend, Barron magazine launched an article entitled "Bitcoin is a safe haven?", skeptical about Bitcoin. Barron magazine wrote: "This week is definitely a good test of whether an asset is a safe-haven asset." The Argentine market collapsed, the US Treasury yield curve reversed (considered as a recession indicator), trade tensions intensified, the German economy The situation is grim and so on.

However, in this case, it pointed out that Bitcoin fell by 10% this week. So, is the argument of this equation "bitcoin = digital gold" unreliable?

wrong. Bitcoin is like gold…just like the 1970s.

Safe-haven assets should be boring. Take gold as an example: Since 1980, the annualized return on gold has been 2.3%/year. After inflation adjustment, the annualized income is -0.7%/year. Although there are quite a few good years, such as the 2000s, but for most of the year, it just sits there, like a clumsy rock, to maintain its value.

There is no problem with this. After all, this is the role of gold.

If you are interested in wealth creation, history shows that you don't actually want a value store, what you want is an emerging value store. That is to say, this asset has all the characteristics of value storage, but it has not been widely recognized by investors. (Blue Fox Note: The author's implication is that emerging value storage assets have more profit opportunities.)

This can be known by studying the history of gold. Most of the return on gold in modern times came from the 1970s.

l 1970s: 1,365%

l 1980s: -22%

l 1990s: -28%

l 2000s: 281%

l 2010: 50%

Of course, in the 1970s, the United States gave up the gold standard. At the time, people didn't know where gold should go. Will it be a “safe haven” asset that is not bound by the dollar? Or, as John Maynard Keynes said, being abandoned as a "barbarian relic"?

The result is that gold prices fluctuate significantly during this period, as these two views come back and forth. In some years, such as 1975, the value of gold fell by 25%. In some years, such as 1979, it soared 120%.

Not only that, but there are also fluctuations every day: in 1973, the price of gold once exceeded 3% of fluctuations every ten days. For me, this is like the story of Bitcoin. (Blue Fox Note: Such fluctuations are small in the field of Bitcoin. Only similar, not year-on-year.)

Gold has the potential to be thrown into historical trash cans, as experienced in shells and other forgotten value storage assets, however, it is this risk that causes gold to generate volatility and strong returns. It turns out that gold actually continued to be a safe haven, and returns soared, with more investors taking gold as part of their portfolio.

The same process is happening today in Bitcoin.

(Note: In the mid-2000s, gold rose sharply, largely because of the first gold bullion ETF, the launch of SPDR Gold Shares, which brought a new wave of investors; quantitative easing monetary policy also help).

Bitcoin is both a safe haven asset and a volatile asset, let us get used to it.

People like to make analogies and put unfamiliar things into the box. Bitcoin = the narrative of gold is a simple analogy, because bitcoin has much in common with gold. It is scarce, portable, homogeneous, separable, does not rot over time, and is valuable even without cash flow. Also, at some point, Bitcoin has shown the same signs of classic value storage.

But at the same time, Bitcoin is also a risky asset. It is a new asset, just as gold has been in its first decade, and its long-term position in the future world is not safe. As a result, it has the same characteristics as other risk assets such as stocks and venture capital. When the market enters a safe-haven model, some people buy it as a safe haven asset, while others lose confidence and sell it to reduce risk.

These two forces – avoiding the threat of macroscopic situations and exposure to risks – may create direct conflicts. For example, when the market is in trouble for macro reasons, the daily returns of Bitcoin become difficult to interpret.

However, over time, the dominant paradigm is clear: Bitcoin is an “emerging value store”. Every day, more investors are increasingly confident about Bitcoin's position in the world. Every day, it makes it easier for institutional investors and financial advisors to buy. Every day, millennials, relative to gold, they prefer bitcoin.

Like gold in the 1970s, it turned into volatility but with a strong return. Given the continuing skepticism about the social role of Bitcoin, it still has a lot of room for growth.

Maybe one day, Bitcoin will become very boring. (Blue Fox Note: The author responds to the above mentioned, gold is as boring as rock.) But if we arrive at that point, the future price will be much higher than today's price.


Risk Warning : All articles in Blue Fox Notes can not be used as investment suggestions or recommendations . Investment is risky . Investment should consider individual risk tolerance . It is recommended to conduct in-depth inspections of the project and carefully make your own investment decisions.