With physical currency in constant flux due to various geopolitical aspects and uncertainty, people (including investors) increasingly buy forms of cryptocurrency as an asset. As detailed in this Investopedia article, forms of digital money like Bitcoin and Ethereum are rapidly growing in value with demand greatly outweighing supply. With theoretical maximums far off in the future, this form of investment doesn’t seem to be slowing down anytime soon.
On the contrary, the article explains that gold is facing the opposite fate. With productions of this precious metal at an all time high, there is a much larger supply than there is demand by investors. As a result, the price of gold is steadily dropping, potentially as a direct result of the rise in cryptocurrency.
According to Fundstrat Global Advisors, their research indicates cryptocurrency values might increase by at least eight fold in the next five years, meaning investing soon is likely the best option if you wish to invest at all. By the end of that five years, Bitcoin’s conversion rate may be as much as US$20,000, making it nearly impossible to get your foot in the door when just starting out. To further stress the importance, this is a low estimate, with others predicting an increase to as much as US$55,000.
Tom Lee, head of research for Fundstrat, also mentions in his analysis of cryptocurrencies that the price of gold will likely not change much over this same time period. “Our model shows gold’s value being relatively static against a rise in Bitcoin.” He also believes that central banks investing in Bitcoin could set up the cryptocurrency as a substitute for gold in the marketplace.
Despite this, other researchers and economists warn of a potential crash or bubble burst in the impending future for Bitcoin and other forms of currency like it. Though this is entirely possible, the increasingly high demand and low supply for cryptocurrency makes this unlikely so long as the currency continues to be coveted and exchanged between owners. Only careful observation of the market can truly tell us what to expect, though.