How Bitcoin Challenges Gold

In an extraordinary week for financial markets, Bitcoin held its ground. For several years I have highlighted the close correlation to risky assets, and tech stocks in particular. Yet for the past few months, I have highlighted how Bitcoin could detach itself from the pack and offer investors an exciting, liquid and uncorrelated asset class.

Bitcoins breaks away

The power of gold

I have studied the gold market since 1999 and have found it fascinating. Along with silver, it has played a central role in monetary systems since the early days of civilisation. That proved particularly useful when communications were poor, money was weighed, and information was exchanged by ship. Exchange rates were fixed to gold, because gold is gold, wherever you are. Gold was the original fintech.

Bitcoin versus gold

The merits of gold are proven, whereas to many, Bitcoin is still seen as the new kid on the block. With limited supply, Bitcoin was designed to become digital gold. It is secure and robust, yet has the advantage of being able to transact within an instant, all over the world. While shy of 5,000 years of credibility and trust that gold has, the future is bright, as Bitcoin plays catchup.

Building Bitcoin’s credibility

Gold is beautiful, desirable, and inert. It is dense, rare, difficult to extract, and steeped in history. But against that, it is heavy and difficult to physically move. Bitcoin may not be physically beautiful, but has every chance of matching, or exceeding, gold’s financial attributes. Better still, it is easy to move and ripe for a digital age.


(1) The long term bull case, Michael Saylor on Bitcoin, Hedgeye TV, 20/10/2020

Network Demand Strategy

The market health score has risen to 6 out of 6. Velocity has improved and is back above our revised threshold. Miners’ rolling inventory (MRI) is especially strong, and the on-chain data geeks out there might like this chart. It shows the year on year percent change in inventories held by miners. It is striking how they hold on during bear markets as seen by the lower selling pressure in 2014 and 2018. This has turned down again, which is bullish. I repeat, miner selling is bullish.

Falling inventories is bullish

Applied data for digital asset investors. ByteTree provides real-time data, fundamentals, technical and deep blockchain market analysis for Bitcoin, and more.

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