By Bill Taylor-CEO, FintekNews & CIO, TLC Capital Group
Bitcoin/Gold-Parity & Beyond
Looking ahead into 2017 I want to be the first to go on record as predicting that Bitcoin and gold will achieve parity. Not only that, I will also look ahead to watch Bitcoin greatly increase in price and begin trading at an ever increasing premium to gold.
Having written previously that bitcoin has become an alternative to gold as a safe haven in times of uncertainty and global instability, it is becoming increasingly clear that this view is being readily shared in the financial community. Of course Bitcoin was designed as a digital form of “money” that could be easily transferable and accepted worldwide, very much as has been the case with gold for centuries. So why is Bitcoin poised to ‘kick’ gold out of the premier position as the “go to” safe haven and, in turn, outperform the shiny metal in the future?
The first thing that comes to mind (at least mine) is demographics. There is a younger global population that has access to technology that did not exist until recently, which connects them to each other and, in turn, others around the world. They may not have a bank account but they have a mobile device of some kind that can replace a bank, cash and a myriad of other functions. This global demographic is also witnessing (or readingon their screens) government monetary control unprecedented in history and, in the case of China, Venezuela, India, experiencing some form of monetary restrictions. With all that said, they also have one other very big thing is common; they do not own gold (or other precious metals for that matter). To make sure they can easily save and have a transferable/accepted form of money, Bitcoin (or other smaller cryptocurrencies) is the first choice of this younger generation. Put another way, bluntly, gold is for old people.
With all that comes another advantage for Bitcoin over gold; supply and demand. There is an ever increasing global demand for bitcoin but only (so far) a limited supply. Whereas gold has trillions in market cap and increasing supply, bitcoin is just the opposite having a small market cap and a fixed supply. Again, to be simple, the huge younger global population wants bitcoin and the aging populace has all the gold it wants.
A third thought that hits my mind, which ties into the supply and demand equation, is generally people do not know of bBtcoin (or its blockchain technology) or how to own/invest/trade the digital currency………yet. More and more companies are accepting Bitcoin, Bitcoin ATM’s will become more prevalent and, of course, the higher the price of Bitcoin goes, the more the media will pay attention. When this “un-awareness” in the general populace slowly becomes awareness, demand will steadily increase and the price will continue to move up.
Obviously there are many other factors that will continue to favor bitcoin, but one very important missing link has recently been addressed and solved; credibility. Certainly gold, and all the ancillary firms associated with precious metals, have a “credibility advantage” over bitcoin (and cryptocurrencies in general) but that is changing rapidly. The CME (Chicago Mercantile Exchange) just recently partnered with a UK based Bitcoin trading platform (Crypto Facilities) in providing a daily Bitcoin price fix (BRR) and very soon a live real time price discovery index. According to Sandra Ro of the CME there will be many more new products (think futures, derivatives, etc) in the near future as well. Again, to be blunt, when the CME (Merc) puts its stamp on something it is “instant credibility”. They are the best.
So, move over gold, here comes the “new” future of safe haven, flight to safety, hedging, investing and global store of value. Maybe the two can “play together”, but Bitcoin has much more going for it in the long term.