bitcoin

Will Bitcoin be the ‘alternative’ to paper money and gold?

The cryptocurrency has seen its price cross $40,000 this week and hit an all-time high as investors search for alternative assets to hedge against inflation and to add to their portfolio 
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Bitcoin has seen a surge in participation from both retail and institutional investors in the past few months and has seen its price-driven to an all-time high. While this has turned some cryptocurrency skeptics into believers, there are still many who see the recent surge in cryptocurrency prices as another bubble that could burst at any time.

As the cryptocurrency moves to new highs and cash infusion into the digital currency grows exponentially, there is a lot of debate if Bitcoin and other digital currencies will replace gold and other traditionally safe investment assets for investors.

A new Digital Gold

Global investment bank JP Morgan said in a note earlier this month that Bitcoin would emerge as a popular contender to replace gold, as more investors opt-out of the shiny metal and look for other assets to hedge their investments. 

Gold, along with other safe-haven assets like sovereign debts, has been seen as a safe bet by investors in times of high market volatility and rising inflation. But as the value proposition of Bitcoin rises, and its use as a means of exchange in trade and commerce between countries and individuals increases, the cryptocurrency could emerge as an unlikely winner.

With the falling faith in the U.S. dollar, and Central Banks around the world looking to build their own digital currencies, Bitcoin is already in the forefront of being an accepted form of payment. Also, in a world today where countries are looking to move away from a single power’s hegemony, dependence of alternative currency sources like Bitcoin could increase. 

Price Volatility

While JP Morgan said that Bitcoin prices could reach $146,000 overtime, they added that the current volatility in Bitcoin prices would not sustain if Bitcoin reaches a higher price in the short term. 

But that could change as more people take to digital currencies. As investors look for alternative investment opportunities, Bitcoin could become the new Digital gold and a new store for value, because of its low investment risk status. If Bitcoin becomes an accepted mode of payment by mainstream financial tech companies like PayPal, it could see more participation by new investors, further raising its value.

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