Advertisment

For
much of human history, lumps of gold have been the yardstick against which all
currencies are measured; it’s the constant, unchanging backbone of the global
economy. However, the price of bullion took a dive in 2016, falling from a July
peak of $1,366 (£1,114) per ounce to $1,128 (£920) towards the end of last
year.

At the
same time, Satoshi Nakamoto’s Bitcoin,
a decentralised “cryptocurrency” invented in 2009, was enjoying the
best year of its short life, adding more than 120% to its value in twelve
months. By the time gold reached the nadir of late December, Bitcoin’s price
was surging, buoyed by uncertainty surrounding the dollar in the wake of
November’s Presidential Election.

Bitcoin would
rally to an all-time high of $1,197 (£976) per coin by January 4th –
beating gold and firmly etching itself in the public’s consciousness. But what
does that mean for the world of finance? Should we all start burning our notes
and converting what remains of our economy into cryptocurrency?

Richard
Branson

The
short answer is “no”. Bitcoin is still quite a niche type of money.
Offline, it’s accepted at tech-savvy outlets like CeX and a few stores and pubs
around the country but it has very little cachet with supermarkets or
department stores. It does have a strong following online, largely due to
support from hobbyists and influential folk like Sir Richard Branson, but
Bitcoin’s early popularity owes a great deal to support from the iGaming community.

For
example, BitCasino.io, the first licenced Bitcoin casino,
abandoned fiat currency altogether in favour of
a Bitcoin-only gaming environment. The website, which has
already given away 12,500btc (around £9m) in jackpots, has grown to
include 20 different blackjack variants and a range of lotteries. Players who visit the site and make a deposit for the
first time can also pick up a welcome bonus of up to 1btc.

Security
Blanket

Much
of the attention afforded Bitcoin recently revolves around its
position as a problem-solver in times of economic trouble. For example,
investors concerned about the performance of the pound
after Brexit moved their money into Bitcoin; as mentioned, the
same occurred after the US Election. However, it’s worth noting
that the previous is precisely why gold is popular. 

Bitcoin and
gold are not really in competition – they’re complementary; the former is
simply the preferred investment medium of modern financiers and the latter the
domain of traditionalists. It’s interesting to note though that a number of
veteran capitalists – Bill Gross and the Winkelvoss Twins – have
spoken highly of Bitcoin in recent months.

Gold
is never going away – it’s the archetypical security blanket for investors,
acting as a barrier or “hedge” against financial turmoil like deflation or a
stock market crash. It’s also much more stable in the long term
than Bitcoin, although, with greater mainstream adoption,
the cryptocurrency has become less prone to spikes in value.

Blockchain

The
most likely outcome of Bitcoin’s unprecedented defeat of gold in the value
stakes is that the landmark technology behind the currency, blockchain, a
kind of ultra-secure database, will become far more engrained in economic
endeavours. Blockchain already represents something of an ideal,
being almost impervious to fraud, theft and counterfeiting, and Bitcoin’s
current value represents an expression of trust in the technology.

Even famously
conservative entities like the Bank of England are now
trialling cryptocurrency based on blockchain – RSCoin. Similarly, the
Royal Mint is embedding
bullion sales in blockchain to provide an immutable record of ownership.
Going forward, it’s not unreasonable to expect gold and Bitcoin to exist in
tandem – but blockchain has applications far beyond its native
cryptocurrency.

Get the latest Bitcoin News on The Bitcoin News
Our Social Networks:
Facebook Instagram Pinterest Reddit Telegram Twitter Youtube


RELATED ARTICLESMORE FROM AUTHOR