Bitcoin hit record, worth more than gold

8 years ago - Published in Finance, Fintech Land, Technical Analysis

Bitcoin has reached an impressive milestone as earlier this week the popular cryptocurrency became more valuable than gold for the first time ever.

At the end of Thursday, the blockchain-powered currency topped off gold, hitting the price of $1,268 for a single unit of Bitcoin compared to $1,233 for a troy ounce of gold, BBC reports. The unusual boost of the cryptocurrency price is linked to the increased demand in China, where authorities warn it is used to channel money out of the country.

Recovering from a massive drop to $200 per unit in mid-2015, Bitcoin has experienced a rather significant surge throughout the latter part of 2016 and early 2017 so far. Gold on the other hand has circled around the $1,200 price point for a while now, with some sporadic hikes and drops here and there.

Both bitcoin and gold are considered to be alternative assets. However, they don’t usually trade in correlation. The moment is becoming even more important taking into account that gold is named the “gold standard” of alternative assets. Investors often use it to hedge against potential losses in more traditional assets like real estate and the stock market. It is notable that bitcoin has (at least temporarily) surpassed the price of gold.

At the very launch of Bitcoin, it was predicted to replace gold as the preferred alternative asset and store of value for investors one day. The time hasn’t come yet as Bitcoin is rather volatile and investors don’t feel confident investing in it.  Thus, the current Bitcoin price boost we are observing could be a sign that the cryptocurrency is becoming more mainstream and investors are allocating at least some portion of their alternative investment portfolio to bitcoin.

Perhaps, it will become much easier to invest in Bitcoin once the SEC approves the Winklevoss bitcoin ETF. As the first bitcoin ETF in a U.S market it will make it much easier for both Wall Street and regular investors to buy the digital currency.

There are currently about 15 million Bitcoins in existence. To receive a Bitcoin, a user must have a Bitcoin address – a string of 27-34 letters and numbers – which acts as a kind of virtual post-box to and from which the Bitcoins are sent. Since there is no register of these addresses, people can use them to protect their anonymity when making a transaction.