by Dave Kranzler, Investment Research Dynamics:
The popular narrative that has gripped the financial media searching for reasons that the price of gold is sluggish for reasons other than overt western Central Bank manipulation, is that Bitcoin interest is diverting cash that would otherwise be going into gold. However, I would argue that the type of trading funds playing in the cryptocurrency “sandbox” is little more than “action junkies” looking for anything to buy with high upside velocity. These “investors” never buy gold other than perhaps chasing gold-related securities when the price of gold speeds higher in price (like from early 2016 through August 2016). In fact, a recent report attributes a large amount of recent volume in Bitcoin trading to Japanese retail traders / Japanese men dominate Bitcoin trading (Deutshe Bank)
Seeking Alpha has published my analysis explaining just some of the reasons that the idea that cryptocurrencies are diverting capital away from going into physical gold is little more than anti-gold propaganda. Note: I am not trying to discourage anyone from buying Bitcoin or any other cryptocurrencies. Over a long enough period of time, assuming the Government stays out of the market – and I firmly believe the Government will eventually interfere with the process – the market will decide the relative legitimacy of cryptocurrencies vs gold as a store of value and as money.
This analysis focuses on the retail investor demand for gold and Bitcoin. Institutional investors, for the most part, do not invest in gold or cryptocurrencies.
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