New data shows Bitcoin is rapidly displacing gold

New data shows Bitcoin is rapidly displacing gold as a store of value

Data from Bloomberg shows investors are buying bitcoin at an unprecedented rate, with the cryptocurrency quickly becoming a part of portfolios around the world.

Much of the rush is being led by investors seeking an alternative, uncorrelated investment to traditional instruments such as Crypto Bank bonds or equities, amid fears of global inflation and a gloomy economic outlook.

Mike McGlone, a commodities analyst for Bloomberg, wrote in a tweet that bitcoin’s growth appears to be eclipsing even gold’s.

„Digital gold is pushing aside the old guard. Gold will always have a place in jewellery and coin collections, but most indicators suggest Bitcoin is rapidly displacing the metal as a store of value in investors‘ portfolios.“

It’s a statement to which even Michael Saylor, the Bitcoin-loving CEO of business software firm MicroStrategy, quipped: „The Bitcoin dragon is devouring the kingdom of gold.“

Gold has been used as a historical store of value and medium of exchange for millennia. But the yellow metal has lost much of its appeal to investors over the past decade, and even more so in the past year: its prices have fallen nearly 15% since a peak in August 2020, even as financial assets around the world have soared during that period.

The decline has led many institutional investors to rethink their treasury strategy and turn instead to more valuable equities and bitcoin. MicroStrategy kicked off the institutional Bitcoin momentum with an initial $175 million purchase in August last year – and went on to accumulate over $1.6 billion worth of assets.

The bitcoin rush

Tech companies such as Square and Tesla have also been buying Bitcoins recently, with the former buying $50 million and the latter over $1 billion at various points in recent months.

But it is not just Bitcoin that is being invested in. Meitu, a Hong Kong-listed photo editing app, bought over $22m worth of Ethereum and $17m worth of Bitcoin last week, citing strong fundamentals as one of the reasons for the purchase.

Meanwhile, some say bitcoin and gold can co-exist. According to a report published last month by US bank Goldman Sachs, the two assets cannot „cannibalise“ each other – there would be „plenty of room for both“.

According to the bank, bitcoin is a more „risk-on“ play, gold a „defensive“ play, with the former playing a different role in a portfolio due to its historical volatility.