Bitcoin and gold can coexist as investment asset classes

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Over the past year, bitcoin has made significant inroads as an investment asset class.

Since its launch, cryptocurrency has been relatively retail oriented, in terms of its use in transactions. However, it is now increasingly accepted as a real investment by institutional investors.

Bitcoin futures and options are traded on the Chicago Mercantile Exchange.Credit:PA

The growing list of Bitcoin advocates includes managed investment funds, corporations, and high net worth individuals.

Cryptocurrency derivatives, in the form of futures and options, trade now on the Chicago Mercantile Exchange in the United States and the 660 million Canadian dollars (705 million dollars) Purpose Bitcoin Exchange Traded Fund (ETF) – the first fund of its kind in North America – is listed on the Toronto Stock Exchange in Canada.

The rise of bitcoin has drawn comparisons to holding physical gold as an investment asset. They have similar characteristics – both have limited supply, are outside the traditional financial system, carry no matching liabilities, are uncorrelated assets, and have been used as currencies.

However, there are still marked differences.

Bitcoin is an intangible asset. And like paper money, it is only valuable as long as the public believes it has value. Without the trust of the public, it is worthless.

Gold is real, can be physically touched, and has utility beyond its use as a store of value.

Gold and sovereign currencies have coexisted for a long time. Gold and bitcoin are also likely to establish a similar long-term relationship.


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