Bitcoing is ballin’!
Bitcoin, the cryptocurrency, has surpassed the cost of an ounce of gold, yet again.
CoinDesk’s Price Index shows one Bitcoin to be worth $1,268. Gold, in comparison, was trading at $1235. This latest development brings the cryptocurrency’s market capitalization to over $20 billion.
The digital currency has surpassed the value of gold before. However, it was temporary. This time around, it could be a permanent status. Or so its supporters hope.
Two immediate factors contributed the most towards its latest surge in value.
First, there is speculation that the Securities Exchange Commission (SEC) will approve Bitcoin in the near future.
The Securities and Exchange Commission (SEC) is weighing whether to approve the Winklevoss Bitcoin Trust, and a decision can be expected by March 11.
Secondly, a depreciation of the price of gold.
Many market watchers expect Venezuela to sell-off large amounts of gold reserves to pay its outstanding balances.
Speculations have already reduced the metal’s value by 10 percent.
Bitcoin the steadfast
Political uncertainty in the global political climate has also continued to add to the currency’s popularity.
The shock of Brexit and financial troubles of EU member states like Greece and Italy bring the viability of the Eurozone into question. Bitcoin proponents always try to fill that vacuum.
“If – or when – we see the break up of the zone and the currency, I believe bitcoin will fill some of the vacuum,” Russell Newton, a former JP Morgan trader who now owns the Global Advisors Bitcoin Investment Fund (GABI) told Coindesk.
The US’s hand in the surge
Even President Trump might have also helped Bitcoin. His budget plans clearly lays out a path to spend more on infrastructure.
Increased spending, economists predict, would lead to a decrease in U.S. dollars and a rise in inflation.
Commodity in motion
A Saxo Bank report from December assumes this scenario. “If the banking system as well as sovereigns such as Russia and China move to accept Bitcoin as a partial alternative to the USD and the traditional banking and payment system… we could see Bitcoin easily triple over the next year going from the current $700 level to +$2,100.”
The Commodity Futures Trading Commission classifies the digital currency as a “commodity”.In that sense Bitcoin is comparable to gold. However, pending government approvals in China or the U.S. it remains a ‘risky’ commodity.Click To Tweet
Some analysts called for caution. Spencer Bogart, a researcher with Blockchain Capital, warned that the chances of its approval by SEC are very low.
All eyes on the regulators
It is also important to remember that although $20 billion is a sizable market capitalization, its physical, real counterpart, gold, has an exponentially bigger market capitalization. Gold has also proven to be far less volatile, the recent dip due to Venezuelan sell-off speculation notwithstanding.
In comparison, when bitcoins surpassed gold last time, it was quickly followed by a months-long price collapse.
If it is approved by the SEC, currency as we know it might change very rapidly. A rejection could lead to a price collapse and prevent it from becoming mainstream.
All eyes shall now be on the SEC ruling.