Is Popularity of Bitcoins Adversely Affecting Price of Gold? (+3K Views)

While I think the long run value of gold is probably fine, the metal may have lost some of its value as a safe haven because of a new alternative safe haven currency: Bitcoins….

So says Mike the PhD Guy (http://investmentquant.com/) in edited excerpts (323 words) from the original full-length exclusive article of 1233 words as posted on seekingalpha.com under the title Are Bitcoins Killing Gold’s Price?.

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The article goes on to say in further edited excerpts:

For those who aren’t familiar with Bitcoins, they are an electronic currency that trade completely online. They are not backed by any national government and in theory they have a fixed supply so their value can’t be altered by governments or individuals….

What is noteworthy is that Bitcoins seem to have usurped at least some of gold’s status as a safe haven asset around the Cypriot Crisis. The use of Bitcoins seems to have increased dramatically in Spain, Italy, Greece, Cyprus and elsewhere in Southern Europe over the last two weeks. This is most likely driven by increased concerns about the future value of the euro. Historically, these kinds of concerns would have had investors headed for the safety of gold. Instead, the value of Bitcoins has shot up in relation to the euro.

The chart below shows the price of a single Bitcoin in euros. (All charts come from here: The right side axis is the price per Bitcoin, the left side axis is the volume on a given day).

(click to enlarge)

What the chart details is that the value of Bitcoins, and the average transaction volume have both increased dramatically since Cyprus started making headlines…. [That being said, the above chart alone is not] conclusive evidence that Bitcoin prices are responding to economic distress, and certainly there isn’t enough data to say with conviction that Bitcoins are becoming even a partial substitute for the massive market in gold….

Conclusion

My point is simply to advance what I view as a plausible hypothesis: It is possible that Bitcoins are starting to steal some of gold’s historic role as a safe haven asset, and if that comes to pass it will be a headwind for the metal and the miners of it going forward….

Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.

Original Source

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