There are two main “investment theses” to Bitcoin: that it is a better alternative to USD and that it is a better alternative to gold. These may sound like they are completely opposite of each other, but they are two sides of the same coin.
Originally, all cash was backed by gold, so there was a fundamental reason why it was valued at a certain price. You could take the total value of all the gold backing the currency and divide it by the outstanding bills to get approximately a dollar. They were interlinked in price until it was considered infeasible to keep buying so much gold.
Now, they aren’t tied to each other and investors generally view gold as an alternative currency to USD. What this means is that investors will invest in gold when they believe the future outlook for the US is looking poor.
For example, if the US was going into a financial crisis and it seemed like the Federal Reserve was gearing up to print more USD, prudent investors would move their funds out of USD into a safer haven, like gold.
None of this is new, but this explains why many treat Bitcoin the same way. Bitcoin also has this counter indicative view. In recent weeks as the trade wars have intensified, Bitcoin and gold have both seen a considerable increase in price. Any level of uncertainty causes investors to move their money this way. Gold Vs. Bitcoin
But how does gold compare to cryptocurrency. This is […]
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