Gold vs. Bitcoin
February 29 2024
►Currently, 1 kilogram of gold is equivalent to 1.048 Bitcoin. A drop in this ratio could mean that it becomes more attractive for Bitcoin owners to exchange their digital currency for gold - as gold, expressed in Bitcoin, becomes cheaper.
►At GoldRepublic, we note that some of our customers are gradually exchanging their gains from cryptocurrency, mainly Bitcoin, for gold to balance their portfolios.
►The situation in the physical silver market in 2023 can be summarized as follows: a supply of 1 billion ounces from mines and recycling versus a demand of 1.14 billion ounces from industry and investors.
Gold vs. Bitcoin
Bitcoin is 15 years old, a stark contrast to gold, which has long passed its youthful years. After all, gold has existed for millions of years and has been used for many centuries, including as a form of payment. Therefore, it's challenging to compare something with the status of an elder to something with the youthfulness of a teenager, but I venture to do so nonetheless.
For our clients interested in both precious metals and cryptocurrencies, an intriguing moment has now arrived. Currently, 1 kilogram of gold is equivalent to 1.048 Bitcoin. A decrease in this ratio (see the chart below) could mean that it becomes more attractive for Bitcoin holders to exchange their digital currency for gold, as gold, expressed in Bitcoin, becomes cheaper. The historical low of this ratio was 0.86 (1 kilogram of gold = 0.86 Bitcoin), indicating that the market can fluctuate and may offer opportunities for the observant investor.
SOURCE: WWW.TRADINGVIEW.COM/SYMBOLS/XAUBTCK/
Portfolio balancing
It remains a fascinating comparison between an 'old guard' like gold, with its millions of years of history, and the 'teenager' Bitcoin, which has only been around for 15 years. Although it might be difficult to compare these two, the current value parity between 1 kilogram of gold and 1 Bitcoin provides food for thought about the future of investing in these different, yet somehow comparable, assets.
At GoldRepublic, we notice that some of our clients are gradually exchanging their cryptocurrency profits, primarily from Bitcoin, for gold to balance their portfolio. This indicates that we do not see Bitcoin as a rival, but rather as an ally of gold. Both gold and Bitcoin are characterized by their scarcity, decentralization, and sensitivity to market unrest. A significant distinction between the two, however, is that gold possesses intrinsic value, thanks to its use in jewelry, electronics, and the aerospace sector. Moreover, a few weeks ago, I emphasized that central banks are purchasing gold in large quantities for their reserves, a strategy they do not apply to Bitcoin.
SILVER
Silver Undervalued
The patience of investors with the silver market is being tested, and understandably so. For nearly four years, since the summer of 2020, the price of silver has fluctuated between €600 and €750 per kilogram. Nevertheless, it's important to remember that the fundamental outlook for silver remains positive. Patience is a virtue. The situation in the physical silver market in 2023 can be summarized as follows: a supply of 1 billion ounces from mining and recycling versus a demand of 1.14 billion ounces from industry and investors. This results in a shortfall of 140 million ounces, or 4.5 million kilograms, a trend that has been observed since 2021. Particularly from China and India, a strong demand for silver is expected, partly because almost all solar panels, which require a significant amount of silver, are currently produced in China.
In our increasingly digitalized world, silver plays a crucial role, not only because of its excellent electrical conductivity but also due to its application in military technology, such as the over 15kg of silver used in each cruise missile. In a future newsletter, I will delve deeper into the role of silver!
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