Is gold wobbling like a safe haven? A Coinbase blog post on May 1 suggested that several months after the COVID-19 pandemic, the gold market’s efficiency against Bitcoin (BTC) may be declining. „Bitcoin System / Bitcoin Billionaire / Cryptosoft / Ethereum Code / Immediate Edgen and gold are fundamentally similar as globally accessible and scarce units of value,“ the report said, but recent „challenges“ in the gold market „reveal Bitcoin’s clear advantage over gold.
The event that prompted this observation was a restriction of market supply. As Coinbase reported: „According to the LA Times on March 24, ‚the New York gold market faces an historic contraction as the global pandemic stifles physical trading routes while investors hoard the metal as a safe haven. Investors and bankers were said to be facing a severe shortage of gold bars and currencies.
A crack in the gold armor?
Is the world’s most popular reserve of value losing control? And if so, are investors and gold advocates flocking to BTC as the new hedge in times of crisis? On the problem of supply shortages, some doubted. Campbell Harvey, J. Paul Sticht’s professor of international business at Duke University, told Cointelegraph: „I’m not worried about the so-called bearish contraction. You certainly don’t see it in the data, and people have been talking about it for more than a month.
Kevin Dowd, professor of finance and economics at Durham University in the United Kingdom, told Cointelegraph: „I imagine that these physical delivery problems will be solved soon. We bought some gold recently, and there was a delay in delivery, but only three weeks. I don’t see much connection between such delays and Bitcoin.
The Bitcoin miners expect the price of Bitcoin to exceed $12,000 after the halving
The Coinbase report also suggested that the coronavirus pandemic has had minimal impact on Bitcoin mining: „The Bitcoin global mining ecosystem appears resilient,“ in contrast to gold production, where „gold refineries, miners and supply chains have been affected. In favor of BTC: „Bitcoin does not rely on fragile physical supply chains and is truly accessible globally. Dowd, a BTC skeptic, was not persuaded by this statement either, telling Cointelegraph:
„I’m pretty sure that [BTC] will encounter mining problems in the future, as the amount of Bitcoin mined approaches its limit. What will happen when mining runs out? Do we really believe that the price will become stratospheric to compensate the miners, or do you think they will eventually be driven out?
Coinbase’s report emphasized the relative scarcity of BTC, particularly in light of the upcoming halving, and noted that „Bitcoin’s new supply rate is ~3.6% per year and will soon fall to ~1.7% on May 12, on par with the historic gold shortage. He also referred to the advantages with respect to transaction times and rates. In September 2019, a BTC transaction valued at over USD 1 billion was sent for a fee of only about USD 700, for example. The price to send a comparable amount of gold would have been exorbitant.
The report concluded that when comparing depositing, transporting or withdrawing capacities against gold, „Bitcoin has a technological advantage. And if current market conditions continue, Bitcoin can be further distinguished.