Stress analysis & comparison — Bitcoin Vs Gold
Do you know why big investors are cautious and still about Bitcoin? At the moment, no more than only 4% of hedge funds have bitcoin in their portfolios. Many big A-list Forbes world billionaire entrepreneurs like Warren Buffet have said they won't own bitcoin. Of course, the lack of a comprehensive regulatory framework is a big problem for many, but an equally important reason lies in the extreme volatility of the world’s first and strongest cryptocurrency.
Only recently; Tesla owner Elon Musk, in his twitter response to renowned Harry Potter writer — JK Rowling, said he has only 0.25 BTC in his wallet. This sound rather sarcastic. But however true this is, one would expect Elon Musk to give a more cheering response to Rowling who wanted someone to explain what bitcoin is to her. Especially as Rowling with her influence could rally a huge non crypto community onboard the train of bitcoin and disrupt the market
An important point to note is that Bitcoin's volatility in 2019 was at a record low. Even its growth from $3000 at the beginning of the year to $13,800 in late spring is well within the realistic range for traditional stocks.
However, bitcoin is not just some random altcoin – it is an uncontested crypto leader that occupies almost two-thirds of the total market cap of the cryptos. Imagine that the price of stocks such as Hilton, Apple, or Amazon changed by a factor of four in a quarter characterized by low volatility. Not only conservative investors, but also many aggressive ones would consider it high-level madness to invest in such assets.
If you do this simple mental analysis, you would understand just why people who are not too familiar with the concepts and realities of the crypto market are so skeptical about Bitcoin – to say nothing of altcoins.
Bitcoin is volatile
The last drop from $13,800 to $7,900 and even lower was a cold bath for the overly optimistic supporters of bitcoin, while the pessimists declared – for the n-th time - “You see! Told you so!” Nobody knows how much lower Bitcoin can go - this causes much anxiety not only to those investors who have already bought BTC but also to the much larger number of people and businesses that have been considering the idea of purchasing it.
As the BTC price kept falling during the dip, investors rapidly switched to stablecoins. For instance, at the height of the panic, the exchange rate of USDT rose to $1.1. Some particularly nervous market players were prepared to lose as much as 10% just to get rid of their BTC quickly, regardless of the slippage. This, too, seems like sheer madness to traditional stock market professionals. Interestingly, the market is coming back up and bitcoin is marching close to $10k, but with a constant knowledge that it could come down anytime as fast as it is going up.
On the other hand, any fiat-pegged coin or token has a different issue — an almost zero profitability in conjunction with the higher risks, compared to a bank deposit at 0%. But of course, investors who store crypto as part of their portfolios won't exchange it into fiat. So what should they do?
Gold-backed Aureus Nummus Gold coin (ANG coin)
In the context of the turbulence associated with bitcoin and altcoin markets, as well as the zero-profitability of fiat-pegged stablecoins, the new solution from Aureus Nummus can kill both birds with one stone.
The price of the ANG stablecoin is pegged to that of 1 ounce of 99.99%-pure physical gold with a ration of 100,000 ANG to 1 ounce of real gold bullion. The total number of issued ANG tokens is 30 trillion which is fixed. When ANG is purchased, exactly 1 ounce of gold bullion or gold equivalent will be deposited automatically into a trust account, so that each ANG sold shall be backed by real physical value
The volatility of ANG coins in USD equivalent is equal to the volatility of gold prices in the global market. Considering that investors across the globe hold over $7 trillion worth of physical gold, one can say that volatility is definitely NOT an issue in the gold market.
Profitability of investment (ROI)
The problem of profitability is also taken care of. From history, gold has been growing steadily by 3-5% annually, following the rate of inflation. This means that the price of ANG coin relative to any fiat-pegged stablecoins will grow at the same rate. However, we shouldn’t only take the average historical profitability rate into account, but also the current circumstances. Central banks in leading countries across the world keep relaxing their monetary and credit policies. Similarly, the European Central Bank has recently started a new round of quantitative easing, while the US Federal Reserve is ready to lower the interest rate on dollar-denominated assets once again.
It's a known fact that gold prices grow much faster than average during the years when the monetary policy is relaxed. Indeed, everyone's favourite precious metal has already shown remarkable growth in 2019. Considering that the economic growth in developed countries is slowing down due to the ongoing trade wars, and global health pandemic caused by COVID-19; more experts predict that the price of gold will exceed $2,000 per troy ounce by the end of 2020 – which will result in a 30-40% increase for ANG coin.
Compare this ROI on gold to the zero profitability of fiat stablecoins, and draw your own conclusions.
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Another solid read @kryptarion
Resteemed already. Upvote on the way.
ps. I've noticed that you posted this article ourside PH community on hive? Consider posting within next time. And setting up beneficiary to ph-fund.
our voting power on hive is x2 stronger comparing to steem, so you would enjoy solid rewards
Thank you, I will do that next time.
@kryptarion both bitcoin and gold are very good investment , in real world people most trust on gold as the world economy is depend on gold only.
Thanks for your comment @adityajainxds. I think the acceptance of gold isn't only because it is older than bitcoin, but more because BTC is rather handicapped; whenever the issue of volatility is concerned.
Dear @kryptarion
One of those posts, which surely are worth checking out and reading through. Thanks for solid read.
I blame lack of clear regulations. Most investors wouldn't even know how to pay taxes from their crypto income. And that's a huge issue, discouraging greatly.
4% ? That's actually more than I expected :P I expected less than 1% hehe. So it's a nice surprisse.
ps. If Buffet said that he would never hold any crypto, then my assumption is that he already does hold a lot.
Upvoted already :)
Yours, Piotr
Thanks for your contribution @crypto.piotr
I think you might just be right about 1%. Considering that billionaires like Buffet are not showing any investment interest. I hear people repeatedly attributing lack of regulations to the reason why perhaps bitcoin is so volatile or why it has failed to attract real and genuine investment from hedge funds. I have always believed that implementing regulations and institutional guidelines only bring the bitcoin and cryptos generally under centralised bureaucracy — which seem to me like the fundamentals of the creation of blockchain technology and Cryptocurrency tokenomics.
However I don't think it will be unfair to say that the existence of bitcoin whales only mirrors the bereucratic powers of centralised institutions.
Hehe maybe he already has. I was anticipating a more crypto-support words than his claim of not owning bitcoin.
Thank you for being always so responsive @kryptarion
I'm one of those people.
Fundamentals of blockchain tech and crypto tokenomics is one thing. Knowing that what you own is legal and knowing how to pay taxes from that income is crutial for many.
I personally know someone, who earned quite a decent amount of money in 2017, sold part of his earning and bought himself a car. You won't believe what kind of trouble he got, since he couldn't prove where those money came from.
Regulations (especially in tax department) need to be clear. Otherwise it will stop many investors from showing any interests with crypto.
Not to mention, that decentralization is some sort of utopia. Utopia, which doesn't even make much sense to me.
Yours, Piotr
Very nice reply @crypto.piotr
Impressive Piotr! Unless I do not so much understand the blockchain cruise; the benefits, some of the clear ones which include; transparency (laudable), immutability (the haziest — considering how some tokens could actually be frozen) and innovative application to many use cases like DeFi among others. I feel blockchain and cryptos was a ride to evade centralisation.
I doubt if conforming to regulations was included in Satoshi's bitcoin whitepaper — a rather ominous shortsightedness; considering tax is inevitable, and a possible way government could fight crypto-holders.
This is actually true.
Hehe, I guess we are in same bus here Piotr.
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