Case Study: Identifying The Relationship Of Gold To Crypto
January 21 2019 - 06:47AM
ADVFN Crypto NewsWire
Since
the beginning of modern history, gold has been an important means
of storing value. In the past 200 years, the gold sector has
remained relatively unchanged. However, there have been some
interesting developments implying that change is just around the
corner.
Over the years, gold has proven to
be a suitable alternative to both fiat currency and cryptocurrency.
The real question is, could it perhaps be both? In this article, we
will be looking at three different trends and what this really
means to the whole world of crypto: bitcoin, stablecoins and
legislation.
Bitcoin could serve as a replacement for
gold
During a recent
https://www.chepicap.com/en/news/6503/gold-vs-crypto-nick-szabo-champions-bitcoin-as-a-reserve-currency.html"
href="https://www.chepicap.com/en/news/6503/gold-vs-crypto-nick-szabo-champions-bitcoin-as-a-reserve-currency.html"
rel="nofollow noopener noreferrer"
target="_blank">https://www.chepicap.com/en/news/6503/gold-vs-crypto-nick-szabo-champions-bitcoin-as-a-reserve-currency.html"
style="font-weight:400">Bitcoin summit in
Israel, Nick Szabo stated that
“Central banks will end up using bitcoin as a reserve currency.” In
a Q&A session, Szabo also said, "I think it will be one of the
many reserve currencies that can be used to underpin value on other
things. There doesn't have to be only one anymore."
In
https://www.newsbtc.com/2018/10/01/morningstar-analyst-bitcoin-and-other-digital-assets-will-never-replace-gold/"
href="https://www.newsbtc.com/2018/10/01/morningstar-analyst-bitcoin-and-other-digital-assets-will-never-replace-gold/"
rel="nofollow noopener noreferrer"
target="_blank">https://www.newsbtc.com/2018/10/01/morningstar-analyst-bitcoin-and-other-digital-assets-will-never-replace-gold/"
style="font-weight:400">an interview with MarketWatch, Inton said, “If cryptocurrency
were to displace gold’s investment case, the implications for gold
prices would be devastating. 40% of gold demand relates to
investment, so a shift in investment from gold to cryptocurrency
would be a seismic shock.” If this event were to come to pass, the
repercussions would send shockwaves throughout the world’s global
economy.
https://www.linkedin.com/in/felixohartmann/"
href="https://www.linkedin.com/in/felixohartmann/" rel="nofollow
noopener noreferrer" target="_blank">https://www.linkedin.com/in/felixohartmann/"
style="font-weight:400">Felix Hartmann from the crypto hedge fund Hartmann Capital says,
“Bitcoin bridges the gap between currency and a store of value
asset. It maintains the speed and flexibility of fiat currency
while remaining independent of central banks and governments and
their macro-economic policies such as inflation.”
Gold-pegged stablecoins
For a large number of new
cryptocurrencies entering in 2018, most have proven to be inflated,
volatile or unreliable. That's why 2018 saw ICO’s on the
downfall with stablecoins on the rise. This later became
known as the
“https://www.newsbtc.com/2018/09/29/the-stable-coin-frenzy-continues-met-with-criticism-from-experts/"
href="https://www.newsbtc.com/2018/09/29/the-stable-coin-frenzy-continues-met-with-criticism-from-experts/"
rel="nofollow noopener noreferrer"
target="_blank">https://www.newsbtc.com/2018/09/29/the-stable-coin-frenzy-continues-met-with-criticism-from-experts/"
style="font-weight:400">stablecoin frenzy,” mainly due to the benefits of cryptocurrency
without the volatility.
Gold-pegged stablecoins emerged from the stablecoin frenzy.
One good example of this
is https://novem.ag/"
href="https://novem.ag/" rel="nofollow noopener noreferrer"
target="_blank">Novem who pegged their cryptocurrency to gold.
According to a recent statement, the company has approximately 35
kg in LBMA-certified gold (Q1: 2019), stored securely by
https://www.loomis.com/" href="https://www.loomis.com/"
rel="nofollow noopener noreferrer"
target="_blank">https://www.loomis.com/"
style="font-weight:400">Loomis International. The amount of gold translates to almost
$1,500,000 in collateral.
The aftermath of the stablecoin
frenzy may lead to gold-pegged stablecoins flourishing—especially
if the value is delivered to both consumers and businesses across
the precious metal industry.
Gold and legislation
With a worldwide monetary crisis
being just around the corner, Ron Paul who served US Congress for
several terms from 1976 until 2013, wrote a formal paper, called
“The Dollar Dilemma: Where to From Here?”
https://bitcoinist.com/influential-us-politician-acknowledges-that-efforts-to-replace-dollar-with-gold-and-cryptocurrencies-are-underway/"
href="https://bitcoinist.com/influential-us-politician-acknowledges-that-efforts-to-replace-dollar-with-gold-and-cryptocurrencies-are-underway/"
rel="nofollow noopener noreferrer"
target="_blank">https://bitcoinist.com/influential-us-politician-acknowledges-that-efforts-to-replace-dollar-with-gold-and-cryptocurrencies-are-underway/"
style="font-weight:400">Paul said, “There are several major efforts being made to
replace the fiat dollar with gold or cryptocurrencies, while other
countries are making plans to challenge the dollar as the world’s
reserve currency.” What this really means is that gold or
cryptocurrencies could, in the very near future replace
fiat.
However, this begs the question,
what happens next? Crypto investors need “regulatory clarity.”
According to a recent article by
https://cointelegraph.com/news/us-new-legislation-proposes-to-exclude-crypto-from-securities-laws"
href="https://cointelegraph.com/news/us-new-legislation-proposes-to-exclude-crypto-from-securities-laws"
rel="nofollow noopener noreferrer"
target="_blank">https://cointelegraph.com/news/us-new-legislation-proposes-to-exclude-crypto-from-securities-laws"
style="font-weight:400">Cointelegraph, legislation clarity may indeed be underway.
“Two United States congressmen introduced a
https://www.scribd.com/document/396096529/Token-Taxonomy-Act-of-2018?campaign=SkimbitLtd&ad_group=100652X1574425X95ba6665b04fa55618ce0b93cc8bf849&keyword=660149026&source=hp_affiliate&medium=affiliate"
href="https://www.scribd.com/document/396096529/Token-Taxonomy-Act-of-2018?campaign=SkimbitLtd&ad_group=100652X1574425X95ba6665b04fa55618ce0b93cc8bf849&keyword=660149026&source=hp_affiliate&medium=affiliate"
rel="nofollow noopener noreferrer"
target="_blank">https://www.scribd.com/document/396096529/Token-Taxonomy-Act-of-2018?campaign=SkimbitLtd&ad_group=100652X1574425X95ba6665b04fa55618ce0b93cc8bf849&keyword=660149026&source=hp_affiliate&medium=affiliate"
style="font-weight:400">bill in the House of Representatives on Dec. 20 that
would exclude digital assets from being defined as
securities.”
Final remarks
In the near future, it will be
interesting to see what happens with gold, bitcoins and
stablecoins. A lot of this hinges on the government’s aptitude to
provide investors with regulatory clarity, stablecoin adoption, and
will gold continue to be the reserve currency? Right now, it’s too
early to say, but one thing remains clear—the financial markets are
in for a change.
Source: Forbes
By
Luke Fitzpatrick Contributor
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