Bitcoin Emerges as an Inflation Hedge... Threatening Gold

Gold, a Traditional Safe-Haven Asset, Sees Price Drop This Year
Bitcoin, Valued for Scarcity and Trading Convenience, Faces Trust Concerns

[Asia Economy Reporter Gong Byung-sun] While the leading cryptocurrency Bitcoin is showing a strong upward trend by hitting new record highs day after day, gold, which is considered a representative safe-haven asset, continues to weaken. There are even forecasts that Bitcoin could challenge gold's status.

As of 8 a.m. on the 17th, Bitcoin recorded 65,353,000 KRW, up about 1.3% from the previous day. This is approximately a 102% increase compared to the beginning of the year. On the 14th, it even rose to 71,450,000 KRW.

On the other hand, gold prices are on a downward trend. According to the gold price tracking site GoldPrice, at the same time, gold was priced at $1,731.78 per ounce, down about 11.3% from the year's high of $1,952.70 per ounce.

Gold has traditionally served as a safe-haven asset during inflation or economic crises. In August last year, as the economy contracted due to COVID-19 and countries implemented aggressive fiscal policies, gold prices rose to about $2,069 per ounce. Goldman Sachs, the largest bank in the U.S., also predicted that gold prices could rise to $2,300 this year due to inflation concerns.

Contrary to these forecasts, as gold prices continue to weaken and Bitcoin prices surge, the analysis that Bitcoin is threatening gold's safe-haven status is gaining traction. JP Morgan Chase forecasted that if Bitcoin receives similar recognition as gold, it could rise to $146,000 in the long term. Experts focusing on Bitcoin's potential to replace gold highlight Bitcoin's scarcity, similar to gold. The total supply of Bitcoin is limited to 21 million, with 90% already mined. Additionally, the halving event reduces the amount of Bitcoin mined by half after certain periods, making it even scarcer.

Another reason Bitcoin has recently gained attention is its greater convenience in trading compared to gold. Bitcoin's advantages are especially highlighted when trading across borders. Bitcoin can be traded overseas through a cryptocurrency wallet without complicated procedures. No matter how long it takes, transactions are completed within 10 hours. In contrast, gold requires customs declaration procedures, and when bringing it into the country, authenticity verification and appraisal are necessary, which takes at least more than a day.

Nevertheless, there are strong counterarguments that Bitcoin cannot threaten gold. It is argued that Bitcoin cannot surpass the trust placed in gold. Gold once guaranteed currency value under the gold standard. Above all, unlike Bitcoin, gold has intrinsic value. There is no substitute for gold's flexibility and permanence. For example, gold is used in manufacturing semiconductors and solar cells. However, criticisms continue that Bitcoin lacks special intrinsic value. On the 23rd of last month, Lee Ju-yeol, Governor of the Bank of Korea, appeared before the National Assembly's Planning and Finance Committee and pointed out, "Cryptocurrencies inherently have no intrinsic value."

This content was produced with the assistance of AI translation services.