Gold Could Not Ever Be Replaced by Cryptocurrencies: WGC

SEATTLE (Scrap Monster): The Investment Update Report published by the World Gold Council (WGC) states that gold is very much different from cryptocurrencies. The key characteristics of gold make it a mainstream financial asset. The WGC also notes that gold can never be substituted with cryptocurrencies.

According to WGC, the bitcoin, the commonly traded cryptocurrency, witnessed rapid growth in prices over the past few years. The bitcoin prices skyrocketed by almost 13-folds in 2017 alone. At the same time, the prices have been extremely volatile too. For instance, the prices witnessed nearly 40% correction from its highs during the month of December alone. When compared with this, gold prices are less volatile.

The traded volume of cryptocurrencies is very low. The average daily trading volume of bitcoins is approximately $2 billion, as compared with gold which trades nearly $250 billion a day. Also, bitcoin transactions take time for settlement. On the contrary, gold markets enjoy much higher liquidity.

The diversified demand for gold makes it stand out when compared with cryptocurrrencies. Central banks, retail and institutional investors hold large quantities of gold. The jewellery sector accounts for bulk of the gold demand. In contrast, bitcoins are generally used only as tokens in electronic payment systems. Presently, there exists only limited opportunities to spend bitcoins, WGC notes.

The gold trade is authorized and regulated in many markets across the globe. On the other hand, the use of cryptocurrencies are either restricted or blocked in many countries.Incidentally, China is one among the many countries that have imposed strict restrictions on use of bitcoins. More number of countries are seen imposing regulatory measures to restrict the use of cryptocurrencies. This in turn has led to several hurdles for holders of cryptocurrencies.

In short, cryptocurrencies in general and bitcoins in particular are no substitute for gold, WGC concludes. Gold is a tried and tested investment tool. But, cryptocurrencies, still its early stage, needs to be tested in multiple markets.