With Bitcoin surging and gold declining, can Bitcoin replace gold in the future?
Due to the impact of Trump's victory, Bitcoin surged all the way up, surpassing the $90,000 mark and continually breaking historical highs, approaching the $100,000 threshold.
Compared to the year's low point on January 23, Bitcoin's current price has more than doubled, with Standard Chartered Bank having an optimistic outlook on Bitcoin's price.
By the end of this year, it could rise to $125,000, and by the end of 2025, it will reach $200,000.
The sudden surge of Bitcoin is mainly due to Trump's successful second campaign for U.S. President.
Trump previously promised that if he returned to the White House, the government would ensure that it retained 100% of its Bitcoin holdings and would classify Bitcoin as a strategic reserve asset for the U.S.
Allies of Trump in the U.S. Senate have also proposed pushing a bill when the new Congress takes office next year to sell part of the Federal Reserve's gold reserves to purchase 1 million Bitcoins, establishing the 'strategic Bitcoin reserve' suggested by Trump.
Trump appointed Musk to lead the government efficiency department (abbreviated as DOGE), expecting to cut federal spending by $2 trillion. The spending reduction plan has not yet begun implementation, and Dogecoin, which shares the same name with the government efficiency committee and is also deeply linked to Musk, continues to rise.
Since election day, Dogecoin has risen over 150%, far outpacing Bitcoin's gains during the same period.
The global cryptocurrency market cap has surpassed $3 trillion, exceeding the peak of $2.77 trillion during the 2021 bull market.
In contrast, gold is relatively inferior.
Since the election day, gold has experienced six consecutive declines, almost returning to the $2600 mark; recently affected by geopolitical conflicts, the price has pulled back slightly.
Whether it is pushing for the return of manufacturing or increasing tariffs, both may continue to increase the fiscal deficit. If inflation cannot be controlled, the Federal Reserve's rate hike process will also slow, and rising U.S. Treasury yields will exert downward pressure on gold prices. Trump has been advocating for the swift end of the Russia-Ukraine conflict, which will also diminish gold's safe-haven role.
Gold and Bitcoin have been increasingly included in investment portfolios by more institutions due to their lack of correlation with other assets.
Although the two generally move in opposite directions, there exists a subtle competitive relationship between them, or it can be said that Bitcoin is encroaching on gold's territory.
A study by JPMorgan indicates that funds flowing out of gold ETFs may be moving into Bitcoin ETFs.
BlackRock lists Bitcoin and gold side by side in its choice of safe-haven and hedging assets, even opting for one or the other.
Since its inception, Bitcoin has far outperformed in terms of investment returns, with a cumulative increase reaching millions of times. In the future, can Bitcoin replace gold?
The commonality between gold and Bitcoin lies in the fact that they are both based on a social consensus, meaning their value comes from the general belief that they are valuable.
Gold is an ancient consensus; throughout history, nearly everyone, institutions, and governments have recognized the value of gold.
Bitcoin is often referred to as 'digital gold'; its investment value and technological value are being recognized by more and more people and may become a new value consensus. Earlier, when Bitcoin spot ETFs were introduced, Xiaoba also wrote about it.
In the global ranking of the top ten assets, gold ranks first with a market cap of $17.2 trillion; Bitcoin's market cap has risen to $17.8 trillion, ranking eighth.
When compared to gold, Bitcoin still has significant appreciation potential.
However, since Bitcoin has been established for less than 20 years, it is still uncertain whether it will become a widespread social consensus; it can only be said that the current consensus is still far from the level of gold.
As a new technology, Bitcoin's future is closely related to the development of digital currency technology and regulatory attitudes.
Bitcoin remains in a legal and regulatory gray area in many countries, and its legitimacy has not been widely recognized.
Even in the U.S., the government's attitude towards Bitcoin is constantly changing; this round of increases largely stems from the expected regulatory relaxation over the next four years, but there remains significant uncertainty in the long term.
Moreover, there is the immense volatility; although Bitcoin has anti-inflation and safe-haven properties, it remains a risk asset.
Since 2014, Bitcoin has experienced three significant drawdowns of over 70%, with an average recovery time of 3 years.
According to JPMorgan's analysis, Bitcoin's volatility is 3.7 times that of gold.
Among safe-haven assets, those with lower volatility, higher liquidity, and larger market capitalization are of higher quality.
Compared to safe-haven assets like gold, Bitcoin has a smaller market cap and higher volatility, resulting in poor liquidity due to not becoming a widespread social consensus.
For ordinary investors, a portion of gold can be allocated in household asset allocation for risk hedging. However, if Bitcoin is used to replace gold, one must clearly recognize that this will significantly exacerbate the volatility risk of the holdings, and severe fluctuations in the short term may lead to dramatic drawdowns.
Bitcoin's high volatility and risk may lead professional institutional investors to adopt other methods to hedge the overall risk of their portfolios, but for ordinary investors, it is still not advisable to invest a large proportion of funds simply because of the price surge.
Behind the frenzy lie numerous risks; the characteristics of rapid rises and falls often lead many to be washed out.
