Fourteen years after its creation, the Bitcoin's price cross the $60,000 CHF in November 2022 (nearly 50,000 euros), beyond the price of the one kilogram ingot (46,490 euros). Its market is well over 1,000 billion dollars, a threshold crossed on February 19, or nearly 10% of that of the precious metal (nearly 11,000 billion dollars according to the British site Finbold).
Even better, the average daily trade, $70 billion (from January 1 to March 15) represents 40% of the trade in gold. Last month, the chief executive officer of blockchain technology company Blockstream made a prediction that Bitcoin will whipsaw traders and climb to $100,000 this year as he believes the U.S. Federal Reserve will likely reverse its tight monetary policies before 2022 ends, just before the crash.
Adam Back says people are better off using fiat currencies or stablecoins than holding central bank digital currencies (CBDCs). He warns his 487,800 Twitter followers that CBDCs allow the powers that be to seize and control a person’s wealth.
“Bitcoin is apolitical, bearer, unseizable money, and that is what matters. Stablecoins [are greater than] CBDCs. In fact, CBDCs are systems of control, worse than bank accounts, certainly worse than paper cash, worse than stablecoins, and much worse than Bitcoin.”
How can one compare metal, a tangible asset, to a virtual asset that can only be recovered with a reliable and hyper-secure computer?
Safe haven ?
"Only physical gold protects its owner in case of cataclysm, it is the "Armageddon" asset. (Alexandre Hezez, strategist Richelieu Group). However both assets are benefiting from the flight from money and are competing in their role of protection against the deleterious effects of inflation and/or debt accumulation. "The dollar has depreciated by 85% over the past 50 years," argues Oliver Scott at Finbold. Like gold, bitcoin is also benefiting from low interest rates, which negate their cost of ownership because neither gold nor bitcoin provide interest.
Comparisons with gold also refer to the finite reserves of bitcoin, like gold. Indeed their number is limited by the founding protocol to 21 million units. During the first four years, 2.6 million Bitcoins were created per year to pay miners (50 Bitcoins per block). The deadline should arrive in 2140; 18 million have already been issued.
Be careful before positioning yourself for the eventual final rally! Overnight speculators could favour other assets or crypto-assets. And the big holders who are drying up the market will brutally dump their tokens. As Sheikh Zaki Yamani, former Saudi oil minister, said: "the stone age did not end for lack of stones, and the oil age will not end for lack of oil".
Beware of fluctuations
If you are among those who consider gold to be too volatile to be a good investment product, don't forget that bitcoin is subject to even greater fluctuations. There are programs that take the pulse of what is being said on social networks to trigger orders, much like Robinhood on stocks! But economists are struggling to find correlations, like the link between gold and real rates, to predict them. This is probably because, since gold is issued without any real counterparty, its price only obeys the law of supply and demand.
Beyond the fear of financial imbalances, speculation on gold and bitcoin have very different motives. "Gold responds to a quest for security. Bitcoin is more about risk," says Véronique Riche-Flores, an independent economist and founder of RichesFlores Research, who notes that "gold has declined while bitcoin has risen when cyclical stocks have recovered, a sign of confidence in the economy's recovery.
But bitcoin also matches the appetite for technology stocks, though it has risen ten times faster over the past decade than the Nasdaq. Before banks and large asset managers, it was technology companies. Before banks and large asset managers, it was technology companies that announced they had invested a portion of their cash in bitcoin that caused its price to soar.
"According to a generally accepted economic definition, money is an asset that fulfills three functions: unit of account, instrument of exchange, reserve of value. Bitcoins and other similar devices only very partially and imperfectly meet this definition of money" said already in 2014, Denis Beau, current first deputy governor of the Bank of France, on the occasion of a round table of the Senate Finance Committee.
His services remain extremely reserved, insisting even today: "in reality it is rather a virtual asset, which is speculative since there is no real value. Behind the bitcoin, it is only a relationship of supply and demand between private individuals; and we see that there is a very high volatility. In contrast "The euro or the dollar represent the value and importance of a country's economic activity."
In unison with the services of Bercy, which write on their website economie.gouv.fr: "legally speaking, a crypto-currency is not a currency: it does not depend on any institution, does not have any legal tender in any country which makes it difficult to assess its value and can not be saved therefore constitute a reserve value."
The path to decentralised finance
Gold will always be accepted as a means of payment. Also fiat currencies like the euro or the dollar are "legal tender" and cannot be refused as a means of payment in the country where they are used. On the other hand, the bitcoin is only accepted by merchants who want it, at a price determined by supply and demand.
In addition, its volatility does not encourage purchases in bitcoins. To protect yourself from its variations, platforms offer to use stablecoin. There are several accessible on the exchange platforms on the dollar, (BUSD of Binance, USDC of the American Coinbase with Circle), and from this March 18, the Lugh in euro, (EUR-L) on Coinhouse.
But this new crypto asset will not be able to leave this AMF-registered platform for a long time due to regulatory issues. "The real digital currencies will be those of private players like central banks," says Pierre Lahbabi, CEO of Galitt, a payment specialist.
However, the first registered French platform, Coinhouse, already has more than 200,000 customers. "Globally more than ten thousand addresses have more than a million dollars in bitcoins" underlines Jonathan Nowak, founder of Fructify (registered in France) which offers savings plans from 5000 euros.
With the market consequences and the crash, lot’s of people have lost a great deal of their fortune. Everyone must be aware that investing in Cryptocurrencies needs attention because when a bubble starts you never know where it will end.