Is Gold Leaving Bitcoin(The Digital Gold) Behind?

[Henri Cartier]

Gold is up 14% in 2020 where it has been a horrible year for other markets like oil and metal industry like copper and aluminum, stocks, etc. And about Bitcoin, it is 4.1% down this year.

"The gap between gold and bitcoin returns has frustrated traders who predict that trillions of dollars of coronavirus-related emergency aid and monetary stimulus from the Federal Reserve and other authorities will eventually lead to inflation. "

The International Monetary Fund on Tuesday estimated that the global economy will shrink 3 percent this year, down some 6.3 percentage points below its most-recent projection in January.

Why isn't Bitcoin getting the uplift that gold is increasing?

According to Jeff Dorman, chief investment officer at cryptocurrency-focused firm Arca Funds,

is the physical metal is so much easier to buy. That's especially true for traditional investors who have long turned to gold as a safe haven during times of economic and market turmoil.

According to the World Gold Council, an estimated 197,576 metric tons of gold have been mined throughout history. At 32,150.75 troy ounces per metric ton, and based on the current price, that works out to an outstanding value of about $11 trillion. That's 87 times the outstanding market value of all bitcoin ever produced, currently about $129 billion, according to CoinMarketCap.

In a report published by Coin Metrics, digital-asset research and data firm ran the math on bitcoin's correlation with gold. Historically, the correlation hasn't been strong, wrote the analysts, led by Nate Maddrey.

But since March 12, the depth of the coronavirus sell-off for bitcoin, the correlation with gold has increased. It's still pretty weak, currently, at less than 0.5, where 1 represents perfect synchronicity, 0 is no correlation at all and -1 is a perfectly inverse relationship:


Image source: Coin Metrics

"These are small pieces of evidence that the correlation between bitcoin and gold may be growing," according to Maddrey and the Coin Metrics team. "However, bitcoin’s overall correlation with gold is still relatively weak."


Image source: Coin Metrics


>> After reading this article/news about the digital gold which is going down the gold. Will this be a short time uncertainty due to pandemic or is the inflation will continue for the long term? What is your opinion on this?

We hope everything becomes normal and the Digital gold should stand out of this pandemic.


Source:
https://www.coindesk.com/first-mover-gold-is-crushing-bitcoin-but-inflation-may-bring-the-cryptocurrency-a-boost

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[DdmrDdmr]

The former chart, according to the methodology described in the referenced article, corresponds to natural log returns using Pearson correlations over a 250 day rolling window (i.e. each data point analyses the prior 250 days). The second chart though uses Spearmans correlations, arithmetic (not logarithmic) and a 180 day window.

The former shows better results in the correlation charts than the latter, although the latter is the one that we can play around on Coinmetric’s website.

Focusing on this second chart as is, the correlation is weak as per their own definition. Values range between just below 0 and just under 0,2 for the yearly window displayed in the chart, which corresponds to a very weak correlation:
 

<…>
Correlation is an effect size and so we can verbally describe the strength of the correlation using the following guide for the absolute value of:
•.00-.19 "very weak"
•.20-.39 "weak"
•.40-.59 "moderate"
•.60-.79 "strong"
•.80-1.0 "very strong"
<…>

https://coinmetrics.io/correlations/#assets=btc-s&p
http://www.statstutor.ac.uk/resources/uploaded/spearmans.pdf

In any case, it we are trying to see the effect of the pandemic on the correlation (as potential peer stores of value), the values displayed need for more time to go by as, as I mentioned before, each data point requires a historical of 250 days (for the former chart) or 180 days (for the latter chart). 

[Cnut237]

Why isn't Bitcoin getting the uplift that gold is increasing?

Ignoring the data for a second - it makes me shudder to say that, because in general I demand data and evidence - but ignoring the data...

The reason that bitcoin is not getting the uplift that gold is getting is because: bitcoin is not seen as a store of value.

We all know that bitcoin has the potential to be a safe haven asset, and the ultimate store of value. We all know the reasons for this, it's all been covered many many times, including why bitcoin is superior to gold as a safe haven and store of value.

However, at the moment the crypto markets are still (relatively) young. The bitcoin market is still comparatively low volume, which means that volatility is high. We are some way away from an end state here. Bitcoin is at the moment considered by the general public to be a high risk high reward gamble, in short, the sort of asset that you might buy into when stocks and shares are enjoying a boom, when the economy is healthy and you have plenty of money, it's speculative, a long-shot that if you are a big investor you might throw some money at. But it's not currently a place to go when the economy hits the rocks and you are pulling out of stocks and shares and looking for somewhere safe.

Not yet.

[RapTarX]

The overall GOLD market size is supposed to be more than $11 trillion as of now; on the other hand, bitcoin market size is one tenth of a trillion as of now.
GOLD is widely well-known to a lot of investors while BTC is far from that. It's okay to compare both but comparing both on changes within a year isn't enough to get the actual output. GOLD is seen as a store of value to everyone including investors to some people who use as ornaments while BTC is yet to be store of value due to the high fluctuations.

[exstasie]

"The gap between gold and bitcoin returns has frustrated traders who predict that trillions of dollars of coronavirus-related emergency aid and monetary stimulus from the Federal Reserve and other authorities will eventually lead to inflation."

Yeah, eventually, when the actual recovery comes. This isn't the recovery.

The economy is actually experiencing extreme deflationary forces right now. USD inflation has absolutely nothing to do with why gold is going up.

Gold is going up because the world's largest miners and smelting factories are shut down, so physical supply to markets has been drastically cut. That combined with panic buying from physical gold bugs has created short term bullish conditions.

https://www.reuters.com/article/precious-refining-argor/update-1-three-swiss-gold-refineries-suspend-production-due-to-virus-threat-idUSL8N2BG3ZJ

https://www.bloomberg.com/news/articles/2020-04-09/world-s-deepest-mines-to-take-weeks-to-open-after-virus-shutdown

I see this as temporary. When the stock market turns bearish (sometime between now and early May), so too will gold (and BTC) as we enter another short term liquidity vacuum.

[pixie85]

Both markets are heavily manipulated. Can we really say that gold is leaving Bitcoin behind? In the last 5 years Bitcoin gained much more value than gold, so it was already ahead.

You're confused about the price because you're looking at a short timeframe. Gold hasn't passed it's ATH from 2013 and 14 yet so it's barely recovering after some corrective years.

[K-Paxian]

Maybe just a short term 

[STT]

Gold has been down since 2011 where as crypto has grown far more.   You have to consider the wider picture for commodities and gold in total to really contrast one against the other.   As Bitcoin is over a decade old now its possible to do so though not exactly fair as Bitcoin came out of nowhere and of course shows far greater growth.
  I watch gold every day, arguably its a superior currency to any other especially at this time in peak politics and debt based currencies.   Gold itself despite being many eons old and ancient in its usage, is somehow now also an emerging global currency and will be traded more and show a higher price when placed vs FIAT.    Put simply gold should be rising in 2019 2020 and many years forward as it reflects the larger dollar monetary base which forms the global reserve currency system, very few national currencies hold a tighter standard though Bitcoin is restricting its block reward now it still has work to do on its demand, utility and usage.   
  Gold and Bitcoin will swap back and forth probably many times, BTC has a far higher monetary velocity to it I think where as Gold relies on buying as an asset for security only.   National governments especially dont move their gold but just issue notes of worth against it as a security where as BTC definitely moves transactionally.

[Heisenberg_Hunter]

Right from the beginning when I got to know about bitcoin or cryptocurrency, I had 2 standards for considering them. One as the common SoV concept and another was the usage of bitcoin as a MoE for buying goods and commodities. This is completely based on the individual's perspective and how they are using bitcoin. Right from using bitcoin in 2017, I had been using them as a MoE for global transactions and only a very few percentage of my investment is being considered as a SoV. Bitcoin was created by satoshi as an alternative to payment system and today's developers are striving hard to scale bitcoin along the terms of Visa and other payment processors. Why should someone create a protocol called Lightning Network if we are considering Bitcoin as a SoV? This perspective is completely based on my thought on bitcoin and it would vary among different bitcoiners.

If something needs to be considered as a MoE, they shouldn't be subjected to volatility standards and should be stable for quite a certain amount of time which isn't happening with bitcoin. Gold on the other hand, is rising in value for quite a long time and would most likely reach even greater heights in future. If bitcoin tends to follow up the similar strategy as the market has been following all these days it would rise up in price. But from a MoE perspective since there is demand for bitcoin and limited in number, they should certainly rise in price to be used up as a global transaction currency. If there is higher adoption towards bitcoin being used as a global currency, there is no other go for it to rise in price to support the global population which is currently happening right now.

As Cnut237 pointed out, we are still mining bitcoin and the market is relatively new. For a market to stabilize, we need the commodity to get settled and to reach a stabilization. If 99% of the coins have been mined, we would be reaching the stabilization point and would have a price to quote until then there would be influx of virgin bitcoins from blocks and volatility would rise up and down.

[buwaytress]

Jeff Dorman, who the hell's he? Gold is so much easier to buy? Especially true for traditional investors, no, only true for traditional investors. But let's say Warren Buffet wants to buy gold. How does he do it? He calls up his broker, tells him he's got this much for this much, brokers says ok I'll call you back with a deal, then they get their lawyers and accountants to escrow the money and then ok, he gets certificates in his name.

Paper promises, he doesn't actually see the gold.

I want to buy bitcoin now, right now, in any country anywhere in the world, I just go online, find a trader who's online, accept his price, send him the money. If it's instant transfers like in most countries, he sees my payment, sends me my bitcoin. If it's escrow, fine, another step to withdraw to my own wallet (but worth the extra security). It's mine, all mine. Not a promise, not an account that tells me I have something, mine. In my wallet.

[Russlenat]

Gold is consistent because people believe in gold that it has a stable value and a real store of value for their money.
However, it's too early to make a conclusion, 2020 is not over yet, so there's still a big chance that bitcoin will rise.

The good thing about bitcoin is that it will not only rise 20% or less than 100%, it could rise higher and it's been proven in the past.
If basing only on the graph or related resources, we can't certainly tell what would happen as Bitcoin is full of surprises, we might see a bull run this year.

[davis196]

Are going to continue the good old "gold vs.bitcoin" discussion?
In a crisis,95% of all people stick to what's known and what they are familiar with-gold.
Gold isn't as volatile as Bitcoin and it's price/value increases every time there's a economic/financial crisis.
It's common sense the the gold price will increase and the Bitcoin price will stay volatile.Bitcoin is a riskier asset than gold.Most of the investors are running away from risk.
When everything is back to normal and greed starts to dominate over fear in the markets,many investors will choose bitcoin over gold.

[Lucius]

Are going to continue the good old "gold vs.bitcoin" discussion?

Comparing gold to BTC is a topic that never loses interest from forum users, though the only touchpoint of these two assets is that they can serve as a store of value. Although gold has undoubtedly a long tradition and serves many purposes, it still makes no sense to compare it with BTC, especially in the short term.

OP is saying "gold is up 14% in 2020, and BTC is down 4.1%", but does that mean anything at all? BTC has only been around for 11 years, how long history has gold? Looking at the big picture, gold has seen a 43% growth over the last 5 years, and BTC is up for 3400% from 2015 ($200 -> $7000).

Why isn't Bitcoin getting the uplift that gold is increasing?

If less than 1% of the world population buys/sells/owns BTC, then it is clear that we are still far from some major adaptation. If you ask 100 random people to explain to you what BTC is, maybe just one would give you some meaningful answer - so try asking the same question for gold.

Gold cannot leave BTC behind because it has an advantage that goes back thousands of years, and it's totally pointless to expect that this can change in just 10 years.

[Natalim]

If we think of stability, gold will win on the battle betwen bitcoin, that's for sure, but gold does not pump like bitcoin does, so let's see and judge them by the end of the year. Also, I'm not expecting that this pandemic will last til the end of the year, when this will be over, people will be back to business as usual and we will eventually see crypto to grow again. I'm not seeing it's certain, but I trust that crypto would give better profit than investing in gold, especially if you are not a big investors.

[Febo]

Gold is up 14% in 2020 where it has been a horrible year for other markets like oil and metal industry like copper and aluminum, stocks, etc. And about Bitcoin, it is 4.1% down this year.

Bitcoin is so volatile, that it might have 14% year to date gains  before end of this weekend. And then whole article your post is base on is totally pointless.

[dothebeats]

Currently, almost all investors of traditional assets and stocks are eyeing gold as it serves as a good hedge against the current economic situation that the world is in. Most stocks are down because people who are invested in such moved their assets to gold for the mean time, and does not trust bitcoin well enough to consider it as something to place their funds while they wait out the storm. On the contrary though, Americans who received their money from the stimulus fund seems to be buying bitcoin presently as evidenced by market data. It just goes to show the psychology and ability of the rich and the middle class in terms of preserving their assets. Rich dudes have the means to buy physical gold, keep it safe and hope for the best while the middle class can buy bitcoin or any other crypto and store it directly without having to go through hoops and hassles and again, hope for the best.

[Gozie51]

Gold is consistent because people believe in gold that it has a stable value and a real store of value for their money.
However, it's too early to make a conclusion, 2020 is not over yet, so there's still a big chance that bitcoin will rise.

The good thing about bitcoin is that it will not only rise 20% or less than 100%, it could rise higher and it's been proven in the past.
If basing only on the graph or related resources, we can't certainly tell what would happen as Bitcoin is full of surprises, we might see a bull run this year.

I like your response about why gold has been stable in value. The government are solidly behind gold. They use gold for many things including jewelry and they have kept an eye constantly on it. They control too, the activities of gold from country to country and this one reason the price is stable, it is part of stock exchange. I wait for when bitcoin will gain the influence of government.

[BrewMaster]

Gold is up 14% in 2020 where it has been a horrible year for other markets like oil and metal industry like copper and aluminum, stocks, etc. And about Bitcoin, it is 4.1% down this year.

everyone knows that the most profit is always coming from bitcoin but only to day traders and long term investors. those who look at short term charts can see losses at times.
so lets take a closer look at these two markets:

1) 2020 bitcoin's 86% rise versus gold's 4%.
after the coronavirus scare and the market manipulation that everything dropped bitcoin went back up 86% while gold only went up 4%

2) the actual 1 year (past 365 days) bitcoin went up 112% while gold went up only 31%

3) in the past 5 years (from Gold's lowest price in the past decade, note that gold price was higher than this, i intentionally used the lowest gold price possible to get the maximum gold price rise) meaning from 2015 bitcoin has gone up 13100% while gold has only gone up 48%.

The gap between gold and bitcoin returns has frustrated traders

if anyone is frustrated with these returns and think for a second that gold is leaving bitcoin behind then they are doing it wrong!!!

[STT]

The time frame for gold rising is more like decades, if we could select decades for bar size on the chart.   Of course nobody considers things in that way but I honestly think its so easy to get mixed up considering things short term as if it matters.   The surprising thing about BTC would be that it does seem to be influenced by macro monetary policy when many thought it would disappear long ago as irrelevant and unrelated to any real currency flow.

Are going to continue the good old "gold vs.bitcoin" discussion?

Its more a case of gold vs everything and anything.   Why the heck do you want to hold a piece of metal instead of something usable and instantly transactable.    Its the two dynamics to the economy of transaction, commerce and savings and gold is mostly about saving value for later.   BTC is more involved in actually enabling commerce that might not occur otherwise like across borders or locked down countries with capital controls and so on.
  Pricedingold is a good website that measures the price of anything including crypto.

[exstasie]

The pandemic has caused mining and production shutdowns, leading to increased gold prices. However as panic buying of physical gold fades, a new reality is setting in: consumer demand for gold is plummeting.

Indian gold demand could hit three-decade low as lockdown hits festivals, weddings

MUMBAI (Reuters) - India’s gold consumption in 2020 could fall as much as 50% from a year ago to the lowest level in nearly three decades as a nationwide lockdown has closed jewellery stores during key festivals and the wedding season.

The drop in consumption by the world’s second-biggest gold buyer could limit a rally in global prices, which hit a more than seven-year high earlier this month. The fall in demand could also narrow India’s trade deficit and support the faltering rupee.

“We have never seen such kind of demand destruction happening. Sales are zero during the lockdown,” N. Anantha Padmanaban, chairman of the All India Gem and Jewellery Domestic Council told Reuters.

He said India’s gold consumption in 2020 could fall to 350 tonnes to 400 tonnes, the lowest since 1991, and down from 690.4 tonnes in 2019.

I think those betting on a new ATH from here are in for a rude awakening soon.

Jeff Dorman, who the hell's he? Gold is so much easier to buy? Especially true for traditional investors, no, only true for traditional investors. But let's say Warren Buffet wants to buy gold. How does he do it? He calls up his broker, tells him he's got this much for this much, brokers says ok I'll call you back with a deal, then they get their lawyers and accountants to escrow the money and then ok, he gets certificates in his name.

Paper promises, he doesn't actually see the gold.

I want to buy bitcoin now, right now, in any country anywhere in the world, I just go online, find a trader who's online, accept his price, send him the money. If it's instant transfers like in most countries, he sees my payment, sends me my bitcoin. If it's escrow, fine, another step to withdraw to my own wallet (but worth the extra security). It's mine, all mine. Not a promise, not an account that tells me I have something, mine. In my wallet.

It's plenty easy to buy physical gold too, which you can hold in your hands. Just order from APMEX or a similar retailer. You can even pay with BTC. https://www.apmex.com/