Mining, News

The Digital Gold Rush: Gold Prices Drop as Bitcoin Cements its Credibility

May 13, 2021

The $1 trillion market capitalization milestone recently achieved by Bitcoin has caused investors to reassess the age-old comparison of gold and the now-famous cryptocurrency. With a market cap of $11 trillion, gold has been used as a timeless safe-haven asset for more than 5,000 years. In contrast, Bitcoin, also known as digital gold, has at times been perceived as a risky investment used only for short-term profit.

Bitcoin's ascent over the last 12 years has been affirmed by recent investments from Tesla and other influential deep-pocketed players. This is sure to change how the digital coin is perceived, particularly when compared to the declining prices of gold.

Bitcoin Predicted to Surpass Gold in Less than a Decade

The comparison between the two assets is applied to their use in portfolios or hedge funds; they are often used to diversify the fund against fiat currency inflation due to unsustainable fiscal and monetary policies.

The sentiment of increasing investment into Bitcoin over gold has been supported by many prominent names within the investment industry. "Although bitcoin has increased hundreds of percent in the last few months, it is likely to continue appreciating in US dollar terms over the coming years." says Anthony Pompliano of Pomp Investments and Morgan Creek Digital Assets, "I suspect that bitcoin's market cap will surpass gold's market cap by 2030."

The decline in gold prices can be attributed in part to Bitcoin hitting the mainstream, with the general public becoming increasingly comfortable with crypto investment. Bitcoin’s ease of liquidity, exchange, and broader use in the modern economy provides a substantial advantage over gold, the primary purpose of which is to maintain its value.

Maximizing Investment Returns with Digital Gold

The principal benefit of investing in Bitcoin or purchasing Bitcoin miners is the high potential for it to continually increase in value, as well as its predicted future role as a mainstream asset class. JP Thierot, CEO of digital money platform Uphold, and Daniel Ives, Managing Director and Senior Equity Research Analyst at Wedbush Securities, have both stated their preference for Bitcoin. The two agree that while the consistent value of gold has made it a reliable asset throughout history, Bitcoin provides too strong of an opportunity to pass capitalizing on.

It is expected that once the capital gains tax increases, as planned to pass by Biden, the wealthy will move their money into cryptocurrency, predominantly Bitcoin, ultimately creating a new 'gold rush' for this digital gold. These rich investors are also likely to purchase miners as an investment, as mining rigs are considered depreciable assets in their first year and can generate profits over the course of three to five years. When those mining profits are held as cryptocurrency, increases in coin prices further maximize investment returns.

An Increase in Demand as the Rush Wages On

As cryptocurrency prices continue to rise and more major investors begin to recognize the profit potential of Bitcoin mining, the availability of mining rigs and colocation services is expected to become increasingly limited. Reputable firms like Wattum Management offer sales of new and used mining equipment, hosting and management services, firmware, and mining pool opportunities at nationally competitive rates, with Wattum’s current hosting price being as low as $0.05/kWh. With increasing acceptance of digital currency and low hosting rates, the time for investing with a reputable industry leader is now.

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