Report: cryptocurrencies are not a rival for gold
The World Gold Council has refuted the comments of industry and social viewers that cryptocurrencies could replace gold as a leading global asset, despite recognizing Bitcoin's "parabolic price increase" in 2017.
The CMO is the market development organization for the gold industry. Its objective is to stimulate and maintain the demand for gold, provide the leadership of the industry and be the world authority in the precious metal market.
In a research report published on its website, the Council recognized that "cryptocurrencies can become an established part of the financial system," but that these new digital assets were very different from gold.
The document noted that the value of gold increased a "solid 13%" in 2017 compared to the previous year. However, the research distinguished that this "was a fraction of the 13-fold increase in Bitcoin at the end of the year".
The research lists a series of significant differences between gold and cryptocurrencies:
Gold is less volatile
It has a more liquid market
It is negotiated in an established regulatory framework
Your role is well understood in an investment portfolio
Gold has little overlap with cryptocurrencies in many sources of demand and supply
"These characteristics support the role of gold as the main financial asset that will probably continue to resonate in today's digital world," said the World Gold Council.
Knocking down the notion of increased competition
At a high level, there are some similarities between the gold supply profile and the cryptocurrencies, according to the CMO analysis. The Bitcoin stock, for example, increases in number at a rate of approximately 4% per year, and is designed to slowly decline to zero-growth around the year 2140.
Although gold can be extracted without a date limit, its production rate remains small and constant. Around 3,200 tons of gold have been extracted on average, each year, which amounts to about 1.7% of the world total of mined stocks.
About 80% of the entire supply of bitcoins has been extracted, leaving 4.2 million coins until the total is exhausted. There is a supply limit of 21 million bitcoins. This rarity helps boost demand and can increase the value of an asset.
The investigation also noted that there is "no quantifiable evidence" that gold assets are suffering directly as a result of cryptocurrency competition. For example, the weakness of physical demand during 2017 for the American Silver Eagles can be explained to a large extent by "the steady and growing march of the S & P 500 index".
"In general, the level of the price of gold in 2017 seems to be consistent with the controllers of recent years and shows no signs of suffering from cryptocompetence," the investigation said. The report said that the growth in competition among digital currencies - more than 1,400 - could have "devastating effects" on its value and supply.
Supporting the technology behind crypto-madness
The CMO report suggests that blockchain technology, the distributed ledgers that support, monitor and settle all cryptocurrency transactions, is "genuinely innovative" and can have wide-ranging applications.
"In the gold market, several players are exploring blockchain in the context of transforming gold into a digital asset , tracking the origin of gold throughout the supply chain and introducing efficiencies in post-trade liquidation processes," he said. investigation.
"Such applications are usually built in private blockchains, operated by trusted parties instead of using bitcoins or other public block chains."
The US multinational courier delivery service FedEx revealed plans to integrate the blockchain technology, joining the "Alliance of Blockchain in Transportation" (BiTA) to develop industrial standards for transport companies.
About the future
"In our opinion, Bitcoin and cryptocurrencies are generally not a substitute for gold," the report summarized. "Gold is an effective investment tool proven in portfolios. It has been a source of profitability that rivals that of the stock market in several time horizons; It has worked well during periods of inflation; it has been a highly liquid and established market; and it has acted as an important portfolio diversifier, exemplifying a negative correlation with the market during recessions. "
"The crypto-market is young, and liquidity is scarce. Its price behavior at this time, while still attractive to many investors, seems to be driven by high profitability expectations. "
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