Bitcoin – the New Gold or a Gigantic Bubble that’s Going to Explode

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Bitcoin – the New Gold or a Gigantic Bubble that’s Going to Explode

Some tout Bitcoin as an online alternative to gold – a currency that is insusceptible to manipulation. However, there are others that believe it is the trendiest investment craze.

Comparing gold to bitcoins might seem like next to absurd. One is a physical, ancient metal. The other one is a hot cryptocurrency. Irrespective of those noticeable differences, these two stores of value have plenty in common.

What Is Bitcoin?

Bitcoin is the most revered digital currency. It is created and maintained electronically. Bitcoin units are forged by “mining” them on a distributed digital network.

When it comes to bitcoins, and in stark comparison to gold or euros, everything occurs in the digital world and the cryptocurrency is not tied to any palpable store of value.

Besides being completely digital, the other really distinctive specific of Bitcoin is the very fact that it is entirely decentralized. While extra euros may be printed by the European Central Bank, the Bitcoin cryptocurrency can only be extracted by a global network of computers which all function to manufacture more bitcoins.

This means that no government or financial entity is behind the cryptocurrency, making it a very tempting store of value throughout periods of inflation, political instability, or insecurity.

Who Is in Charge of Bitcoin?

Satoshi Nakamoto set the rules behind Bitcoin in 2009. Nonetheless, anyone can produce it.

Doesn’t that Render the Currency Valueless?

The inceptors of Bitcoin realized that for anything to be worthy, it has to bear some scarcity. That’s how they made Bitcoin mining more and more difficult with time. Not only an aspiring investor needs a powerful computer to continue mining, but the whole process is gradually getting harder.

Here’s where the analogy with gold kicks in. The metal’s worthiness has been increasing exponentially only due to its scantiness lately – mining of gold is both difficult and costly. That’s why the production of bitcoins is also called “mining”, highlighting the comparison.

Is Bitcoin the New Gold?

Since forever, gold has been deemed one of the most famous safety plays on the worldwide market. However, in 2017, gold has been outpaced by Bitcoin, which gained more than 200% year-to-date.

Bitcoin worshippers claim that the digital currency is the ultimate safety play. That is owing to its clearly-defined and tightly controlled maximum supply – 21 million bitcoins. Irrespective of that, it’s difficult to regard bitcoins as a “safe” investment at the moment.

While supply might be sternly capped, the ever-growing demand for the digital currency is incredibly difficult part of the value equation to predict or even calculate.

Is the Bubble Going to Burst?

The last few years experienced a significant rise in Bitcoin’s value. The price of the currency in 2017 has gone through the roof – from less than $1,000 at the outset of the year to over $3,000 in June 2017. This marks a mind-boggling increase of 1,000% in a period of less than two years.

Simultaneously, while gold is significantly lagging behind Bitcoin, the precious metal is still performing fairly well this year. This suggests that investors are still utilizing gold as a hedge for political risks. So far in 2017, the SPDR Gold Trust is up with over 10%, which is an annualized gain of over 20%.

Regardless of Bitcoin’s stringent supply controls, there is just an enormous short-term volatility and demand uncertainty for it to be a more secure alternative to stocks at the moment. In all honesty, bitcoins are probably never going to wipe out the value of gold. While the speculative bitcoin trading is still on, the precious metal will be the standard when it comes to safe investments.

Gold trading via Forex brokers has been an option for quite a while. Nowadays, trading Bitcoin is also possible through FX brokerages. To choose the broker that will suit your needs perfectly, you can visit forexbrokersreviews.co.uk.

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