Bitcoin enthusiasts have in recent times drummed the narrative of the cryptocurrency is the digital gold, but the coin’s continued struggle to breach the $10,000 once again is putting the narrative in doubt.
Bitcoin has remained flat for the last two weeks, while some altcoins have seen large moves. Most notably, Dogecoin had an extremely volatile week driven by Tik Tok-induced pumping.
Bitcoin’s fate is a result of the continued selloff of the digital asset as investors migrate to safer assets in view of the COVID-19 pandemic that has dealt a massive blow to the economy of nearly every country. At the same time, it is now more challenging than ever to mine bitcoin, as the difficulty has jumped to the highest level ever seen. While some speculated in a loss of miners after the halving in May, analysts at Luno say that miners are still present – perhaps more than ever.
While bitcoin’s narrative as “digital gold” has increased in popularity, the leading cryptocurrency is struggling to outperform the real gold in recent times, say, analysts at Luno, a cryptocurrency exchange. Two reports from Coindesk and Bloomberg had shown that bitcoin outperformed top assets such as gold, silver, platinum, and the stock exchange.
Two reports from Coindesk and Bloomberg found that bitcoin outperformed gold, silver, platinum, and the stock market in the whole of 2019 and the first half of 2020. But the last few weeks in July have not gone according to analysts’ plan. Instead of price heading upwards as predicted, it is trading flat and failing to breach the $10,000 ceiling. As of the time of writing this article, the price of bitcoin was at $9,163.30.
“The bitcoin trading volume is dying out, but the volatility trend may indicate that we are about to see some action again,” the Luno analysts noted. Recent cyber breach incidences have not also helped the narrative of ‘digital gold’.
Last week, bitcoin was the subject of a hacking attack on Twitter that targeted more than 130 accounts. The hack affected the verified accounts of prominent peoples such as Tesla’s Elon Musk, former US President Barack Obama. Binance CEO Changpeng Zhao and founder of Tron coin, Justin Sun, among others. The hackers received more than $125,000 worth of bitcoin by the time Twitter was able to control the situation and suspend verified accounts.
Bitcoin as digital gold describes the similarities in the properties of gold as an asset class that the cryptocurrency possesses. Analysts believe that bitcoin has all the same characteristics as gold. For instance, like gold, bitcoin has limited supply. Only a specific amount of bitcoin – 21 million – exists and will ever be produced. Bitcoin – like gold – can be made into smaller units without losing unit value (1 bitcoin is equivalent to 100,000,000 Satoshis – the smallest unit into which a bitcoin can be broken down to, similar to the cents in a dollar or pennies in a pound). Bitcoin’s technology also makes it very stable, meaning it is not degradable and it is impossible to counterfeit.
But unlike gold, bitcoin can be moved to any place on earth within minutes, no matter how big or small the amount. While many see this as an advantage for bitcoin, it is also responsible for its high volatility. Investors can decide, on a whim, to move large volumes of bitcoin from one wallet to another thereby forcing the price to fluctuate widely.
While gold is increasingly being used as a safe haven, bitcoin has yet to prove it can be dependable. This is mostly because of its volatility. With double-digit variation per day being common, bitcoin falls into the high-risk asset category.
Over the past fourteen days, real trading volume continues to trend downwards, a natural result of a sideways moving market.
But the Blomberg cryptocurrency report predicts that bitcoin would become the equivalent of gold for digital assets by the end of 2020.
“This year marks a key test for bitcoin’s transition toward a quasi-currency like gold, and we expect it to pass,” the report says.
