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Bitcoin, BitStamp, byte tree, central bank stimulus, gold and Bitcoin, internet economy, network effects, real interest rates, risky assets, social media stocks, stimulus
A new report by Bitstamp and Bytetree claims that Bitcoin responds better to increased money supply, rising real interest rates and a strong economy. In stark contrast, gold performs better when real interest rates fall and inflation rises.
In support of these findings, the report pointed out that the price of gold plummeted in the second quarter of 2013 after the Fed hinted that it would raise interest rates in the future. During this period, the value of Bitcoin soared. In fact, the report asserted that “2013 was the best year in Bitcoin’s history (5400%) and the worst year (-28%) for gold since 1981.”
One of the co-authors of the report, Charlie Morris, co-founder and chief investment officer of Bytetree, explained the relationship between Bitcoin and other assets, saying that because Bitcoin “responds to currency conditions, it is naturally associated with risky assets, including stocks. And credit.”
Morris mentioned that 2013 was a very high year (62%) for social media stocks. “This supports my view that Bitcoin is a growth asset.”
On the other hand, gold “prospered because of the decline in real interest rates rather than the stimulus of the central bank, because it has a close relationship with inflation.”
Morris added: “In theory, when interest rates fall and inflation rises, this is the perfect storm for gold. Conversely, when interest rates rise faster than inflation, tight money will appear. A devastating gold situation. .”
The report concluded: “Although people are keen on stimulus measures and have a counterproductive effect on the dollar, gold and Bitcoin are the opposite.”
Nevertheless, the report talked about the complementary but opposite relationship between gold and Bitcoin. It states:
If you invest in gold, you will get 52% and 64% of your Bitcoin investment. However, if you invested in them at 50/50 prices and rebalanced each month, you will now own 93% (until August 2020 ByteTree data).
Elsewhere, the report believes that Bitcoin is essentially an “Internet economy” and its success is directly related to the level of activity on the network and the scale of users. It explores the importance of network effects to the largest cryptocurrencies. It also delves into the underlying technical framework of Bitcoin, and proposes a variety of possible ways for the further development of assets from the perspective of utility.
What is your opinion on the report’s description of the relationship between Bitcoin and gold? Share your opinion in the comments section below.
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