Gold vs Bitcoin 2017: Has Bitcoin Surpassed Gold?

Gold Bitcoin
Credit: iStockPhoto/Tsokur

Gold vs Bitcoin 2017

Bitcoin prices have officially outpaced gold prices per ounce for the first time in the currency’s history. With the bitcoin price in 2017 trading above gold prices, you have a day that cryptocurrency lovers have longed for and bullion bulls have long feared. Indeed, the gold vs Bitcoin rivalry (at least in the media’s eyes) is only poised to become more heated as the year goes on. So is Bitcoin the new gold? And what’s next for the Bitcoin value 2017? Should you invest in Bitcoin or gold?

First, let’s dispense with some of the misconceptions between gold vs Bitcoin in 2017.

Bitcoin is not yet a true hedge asset. Why not? Because it simply doesn’t have the stability to protect you from extreme fluctuations. Gold, on the other hand, is still far more stable, at least compared to Bitcoin. The volatility of Bitcoin might make it a more prized investment, but in terms of a place to stash your assets in order to protect them from economic downturns or currency value-loss, Bitcoin is not an entirely safe bet.

Consider that in the past 12 months, gold has run the range of mid-$1,300s per ounce down to just above $1,100.

Bitcoin, on the other hand, in the same time period, shot up from $400.00 per unit to $1,130 at the beginning of this year, then promptly collapsed to the $800.00s, only to shoot back up to its current all-time high. Which is to say that making a Bitcoin price prediction can be a little trickier than, say, sticking to gold.

Of course, it’s worth mentioning that Bitcoin soared by 225% in those 12 months. But again, that makes Bitcoin’s appeal partly due to its value as an investment and not a risk asset. Drawing investors in can boost value, naturally, but then you run the risk of losing those very same people and finding your hard-earned cash worth less than it was the day before.

While at times the volatility of Bitcoin has approached that of gold’s (which is usually similar to fiat currencies), those times of restfulness are often fast followed by a return to its old volatile ways.

Secondly, don’t let the price deceive you. In the gold vs Bitcoin 2017 competition, the two are still very much operating in different ballparks. Maybe even in different sports.

Combined above-ground gold stocks are currently valued at around $7.0 trillion. Bitcoin’s market cap comes in at a (comparatively) paltry $18.0 billion. Even adding in all the other cryptocurrencies, you still only get to a market cap that amounts to $21.0 billion. (Source: “Bitcoin Reaches Parity With Gold,” Zero Hedge, March 2, 2017.)

Gold v BitcoinData courtesy of Investing.com and Gold Price

Gold has had millennia to establish itself as a worldwide commodity, which only strengthens its place in the global economy. Bitcoin, meanwhile, is not only new and potentially confusing to investors, but it’s also not nearly as secure. If you buy an ounce of gold and put it in a safe, barring a physical assault on said safe, your asset isn’t going anywhere. In that regard, the precious metal has a leg up on the newcomer in the gold vs. Bitcoin debate.

Now contrast that with some Bitcoin horror stories, like that of early Bitcoin miner Jered Kenna who lost millions of dollars worth of Bitcoins to a sophisticated hacking scam. (Source: “Hackers Have Stolen Millions Of Dollars In Bitcoin — Using Only Phone Numbers,” Forbes, December 20, 2016.)

What makes Bitcoin theft even more damning is that there is little recourse available to victims of a theft. One of Bitcoin’s big selling points is the blockchain, a database that anonymously records every single Bitcoin interaction. All BTC movements are final. While this appeals to a great many people’s sense of privacy and security, others may be scared off by the potentially disastrous outcome of a theft like that which played out in Kenna’s case.

A final important consideration (though there are many more—too many to cover in a single article in any depth) is that gold and Bitcoin are driven by, at times, different factors.

The Bitcoin value 2017 is largely predicated (at the moment) on people in countries like China using it to get around strict financial regulations. LocalBitcoins, a site that allows users to post advertisements to sell Bitcoins in local currencies, saw an ¥8.0-million spike from the end of January to late February, showing that Chinese residents are hungry for the online outlet as a way around currency controls, despite the Chinese government’s repeated attempts to crack down on Bitcoin. (Source: “Even China Can’t Kill Bitcoin,” Bloomberg, February 23, 2017.)

Gold, on the other hand, is usually used as a reserve against a potentially flagging U.S. dollar or other widely-traded currencies. Which isn’t to say that gold cannot be used in the same way as Bitcion is as mentioned in the paragraph above, but there is a correlation between the dollar rising and gold prices falling, and vice versa. That is why the new U.S. president, Donald Trump, and his business-friendly economic policies are looking like they might hurt gold and strengthen the dollar in the near term.

Which is to say that while gold vs Bitcoin 2017 might make for a catchy tagline, the two have some key differences that appeal/repel different investors, depending on what they’re looking for and their disposition.

Add in the fact that gold is still more widely accepted than Bitcoin and that Bitcoin can theoretically be overtaken by a rival cryptocurrency (whereas gold is safe from such a threat), and it’s easy to see how the gold vs Bitcoin billing is over-hyped. (Source: “Bitcoin, Gold and the Risks of Bum Comparisons,” Bloomberg, March 6, 2017.)

Bitcoin Price Prediction

blockchain

At Profit Confidential, we’re no strangers to bold Bitcoin price predictions. Our analysts have it as potentially rising to $2,500 a year, based on geopolitical factors like a Chinese economic collapse or the demonetization in India, coupled with businesses warming to the idea of taking payment in Bitcoin. These are some powerful factors that may push investors towards the online currency, making the choice that much harder.

And there are many opinions out there regarding just how high (or low) Bitcoin will go. Some analysts look to the Mt. Gox incident of late 2013, where hundreds of millions of dollars worth of Bitcoins were lost, as evidence that Bitcoin is a balloon waiting to be popped until it can guarantee safety. (Source: “Has bitcoin matched gold’s status? One expert weighs in,” MarketWatch, March 3, 2017.)

With that in mind, trying to have a solid projection for Bitcoin price in 2017 can be difficult, seeing as how the online currency is hardly invulnerable to massive, unexpected swings. And in terms of a gold vs Bitcoin chart, you’re unlikely to see  gold dip as a result of a massive precious metal heist, a la the James Bond movie Goldfinger.

Other, more—shall we say—optimistic analysts have Bitcoin prices hitting as high as $13,000 by March of 2018. (Source: “Bitcoin Price Will Triple Gold in 2018, Silver Achieves Parity With Gold: Clif High,” Cointelegraph, March 6, 2017.)

Of course, that puts the currency on a one-way track to blistering success, but at the same time does not account for another Mt. Gox-type incident occurring.

And others, while not willing to put as high a number on the currency, have similarly boosted Bitcoin as the investment to make in 2017.

Take Brian Kelly, a CNBC contributor, and his take on the cryptocurrency:

“For me, it is Bitcoin. Bitcoin is not just digital gold. It is a technology platform that fintech is being built on top of. It is a once in a life generation investment opportunity similar to the Internet growing just as fast if not faster. It is the Internet of money. Everyone is involved in it. The Federal Reserve released a paper on it. Bank of England is involved in it. 14 of the top 30 banks have active projects.”

He said this in a debate with Peter Schiff, a prominent investor of gold and CEO of Euro Pacific Capital, who has criticized Bitcoin as “digital fool’s gold.” (Source: “Unlike Gold, Bitcoin is Once in a Generation Investment Opportunity: CNBC,” Cointelegraph, March 6, 2017.)

But as mentioned previously, I think comparing gold vs Bitcoin is an exercise in futility. They are very different assets that appeal to very different people. As for the Bitcoin price prediction, expect the currency to continue to shoot up on the back of economic volatility and political instability.

A eurozone collapse could help drive currency skyward. With numerous European elections on the way, that reality is not far-fetched. Euroskeptic wins in France and Germany could spell doom for the continental currency, and within that transition, expect Bitcoin to prosper.

Should You Invest in Gold or Bitcoin? 

Since Donald Trump’s election victory, we’ve seen a six-percent decline in gold prices. While it has since rebounded, there is reason to believe that gold might falter under a Trump administration.

Bitcoin, meanwhile, seems poised to take advantage of a number of economic situations around the world and continue its roaring trend.

If you’re asking which is the better investment, Bitcoin is looking in good shape to take advantage of the political instability affecting global markets worldwide from Venezuela to China.

If you’re more interested in a hedge against the U.S. dollar or to combat inflation, then gold might serve as the more appropriate option.

It’s important to remember not to be taken in by the hype. These are two very different beasts, and you shouldn’t be caught up in the gold vs Bitcoin fervor.