Bitcoin or Gold, or Both - Your Pick? ⛏️
Is Bitcoin still the "digital gold" as marketed? Mark Cuban doesn't like memecoins. Satoshi Nakamoto exposed? Reality of $56M CryptoPunk. IMF urges El Salvador to overhaul Bitcoin regulations.
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Bitcoin has been a top performing asset, better than gold. No questions about it.
Marketers has always used the pitch “digital gold” for Bitcoin.
It’s a value proposition that sits well with the existing, accepted commodity … Gold.
Gold is safe heaven for investors and treasuries in uncertain times.
Can Bitcoin be the same?
The geopolitical tensions and economic uncertainty have ignited the debate.
Read: Will Bitcoin Act as a Safe Haven? 🤔
Some analysts are waving the red flag, declaring Bitcoin's status as a safe haven asset an “utter failure” ⬇️
Others are holding onto their bullish outlooks ⬇️
So, what’s the real story?
Bitcoin is called digital gold because it shares key traits with gold: it's scarce, independent, a safe haven for investors, and super portable.
Read: Bitcoin's Inflation Rate Falls Below Gold 🏆
Independence from government control: Both assets operate outside the influence of government policies, making them attractive hedges.
Bitcoin's flexibility and volatility: Bitcoin offers greater flexibility due to its ease of transfer and storage, but it also has higher volatility.
Gold's stability and limited versatility: Gold is more stable but less versatile compared to Bitcoin.
Return vs stability: Bitcoin offers higher potential returns but with increased volatility, while gold provides greater stability but with limited return potential.
When the economy gets shaky, people often flock to gold for safety. Similarly, Bitcoin is becoming a go-to for those looking to protect their wealth during tough times.
Read: What's Bitcoin Inflation? 🔑
But how is it going so far?
Bitcoin has experienced a significant crash amid geopolitical tensions, particularly between Israel and Iran.
Unlike gold, which has shown stability during market turmoil, Bitcoin's volatility raises questions about its status as a reliable store of value.
In 2021, the Bitcoin-to-gold ratio peaked at 37.53 but has since fallen to around 22.60, marking a 42% decline.
Gold prices have risen steadily, surpassing $2,660 per ounce as of now.
If historical seasonality repeats, gold could experience a more significant correction.
We are looking at a $3,000 per ounce level.
Gold prices have historically shown a tendency to rise in September, especially during US election years with Democratic presidents.
Analysis by Bank of America revealed a consistent pattern of gold rallies in September under Democratic leadership, followed by subsequent corrections.
A 4% crash is not so big in Bitcoin’s world. Is it?
We have seen worse. But, Bitcoin is still hovering around $61K.
The worst days of Bitcoin
Now that’s what we call a crash. Anything below 10% is like a tiny, tiny rock in the way ahead.
Bitcoin’s previous performances during geo-political tensions, were all moderate like this time:
Russia-Ukraine War (February 2022): Price dropped 9% to $35,000.
Palestine Conflict (October 2023): Price remained relatively stable.
Iran Conflict (April 2024): Plunged from $63,000 to below $60,000 in under two hours.
But, Bitcoin was expected to reach the $70,000 mark, aligning with historical trends known as ‘Uptober’. That is the one and only disappointing side of this argument.
Now what is everyone saying?
JPMorgan analysts:
"Rising geopolitical tensions and the coming US election are likely to reinforce what some investors call the 'debasement trade' thus favouring both gold and Bitcoin.
In addition, the fact that Bitcoin [exchange-traded funds] started seeing inflows again in September after an outflow in August suggests that retail investors might also see gold and Bitcoin in a similar fashion.”
Quinn Thompson, founder of Lekker Capital.
“Seems like a no-brainer to be bidding this area with clear invalidation on the back of a 180 degree shift in the macro backdrop from the relative to the 3 previous similar setups.”
Standard Chartered analyst
"Risk concerns related to the Middle East seem destined to push Bitcoin below $60,000 before the weekend, but, positions like the $80,000 call options highlighted here and the circularity vis-à-vis Trump probabilities suggests the dip should be bought into.
This creates an interesting circularity for Bitcoin … Geopolitical concerns may push prices lower, yet these very concerns seem to increase Trump's odds, potentially improving Bitcoin's post-election outlook."
What do we think?
We agree with Bitwise CIO Matt Hougan when he said "the most powerful people in finance are allocating to crypto."
But also that the ultimate choice between Bitcoin and gold depends on the investor's specific investment goals.
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Crypto Community’s Most Awaited Documentary?
Filmmaker Cullen Hoback and HBO are set to debut their film “Money Electric: The Bitcoin Mystery”.
And they have got the entire crypto community talking (aren’t we all talking now?).
So, will Bitcoin creator Satoshi Nakamoto finally be unmasked?
Hoback didn’t confirm if the movie would be doing that.
But he did tease it calling it a “rollercoaster”.
This has split the community in two sides.
And the reveal, if it does happen, could pass ripples in the crypto world.
The documentary might influence public perception of Bitcoin and raise legal and ethical questions regarding Nakamoto’s estimated control over 1.1 million Bitcoins worth $66 billion.
But not everyone wants to know who is behind the identity.
Others argue anonymity is crucial to Bitcoin’s ethos and that attempts to unmask him are speculative without concrete evidence from known Satoshi wallets.
And a few others? They just mocked Hoback for his documentary promotion stunt.
The documentary is scheduled to air on HBO on October 8.
Block That Quote🎙️
Founder of Cost Plus Drugs and American investor Mark Cuban on the Rug Radio podcast.
"Every single meme pool is a rug pull in the works, right?”
Mark Cuban doesn’t think meme coins have any real-world utility.
“Nobody is so stupid as to think this is a great investment.”
They may build strong communities, he agrees. But they lack staying power.
"Every single meme pool is a rug pull in the works, right? Because there's no real reason for it to stick around other than the fun of it, and to see when the token goes up in value because more people came in — it's musical chairs."
So, does the long-time investor never invests in memecoins?
He does consider trading memecoins at times. But has refrained from giving in to the temptation.
And memecoins have had that kind of a year.
As many as 381,401 new memecoins were created in just the last 30 days.
But most of them were part of the pump and dump schemes coming from celebrity memecoins.
Many of these tokens end up losing 99% of their value or more mere days after they are launched for exchange trading.
In The Numbers 🔢
$56.3 million
Amount for which CryptoPunk #1563 was, technically, bought on October 3.
Technically? Meaning?
Well, the transaction was accurate as per on-chain transaction data.
But, after a little digging, the transaction didn’t seem legit.
Why? Because $56.3 million is a lot of money. Worth 24,000 ETH, to be precise.
Plus, it raises more red flags when you learn the punk was sold at around $69,000 just a month back.
And, the CryptoPunk #1563 is categorised as a “floor punk”. Meaning, it lacks any rare attributes justifying an 816x jump in price.
So, then, what exactly happened?
Crypto Twitter called it a transaction made via flash loans, a type of uncollateralised borrowing used to book an arbitrage/ zero-risk profit.
But another developer @0xQuit on X dismissed this as a flash loan manipulation.
Such transactions have happened before. It’s done to artificially inflate market prices.
In this case, the transaction could be to promote a new meme coin - "Kamala Harris Punk”.
IMF doesn’t like El Salvador’s Bitcoin bet
And it wasn’t, before either.
International Monetary Fund (IMF) is now pressuring El Salvador to scale back its Bitcoin policies and limit its exposure to the digital asset.
IMF had recommended “limiting public sector exposure to Bitcoin,” IMF spokesperson Julie Kozack was quoted by Reuters.
El Salvador was the first country to recognise Bitcoin as legal tender back in September 2021.
President Nayib Bukele backed it up with a $30 bonus to all those adopting the government-issued digital wallet - Chivo.
IMF was not happy with the move. It warned the country to step away from Bitcoin and that it raised “a number of macroeconomic, financial and legal issues.”. And, embrace traditional finance.
El Salvador’s macro economy has not been stable.
In August 2024, the IMF voiced the same demands but admitted that many of the purported risks of Bitcoin adoption “have not yet materialised.”
So, what is an unhappy IMF going to do?
Nothing different.
Continue working with El Salvador on its economic programmes and help stabilise its economy.
The Surfer 🏄
Grayscale Investments has launched a new investment fund for Aave's governance token, AAVE, as of October 3. The Grayscale Aave Trust is available exclusively to qualified investors, expanding Grayscale's range of single-asset crypto investment products.
PayPal successfully executed its first business transaction using its PYUSD stablecoin, paying an invoice to Ernst & Young. The transaction aims to showcase the ease of using PayPal's US dollar-pegged stablecoin for commercial payments.
Chainalysis CEO Michael Gronager steps back after a decade, citing a "personal issue." Sari Granat, president and COO, appointed as interim CEO during Gronager's absence. Gronager has been on personal leave since September 25; his return date is uncertain.
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Unsure, this year has kind of undermined the "digital gold" appeal of most cryptocurrencies.
The IMF's stance on El Salvador’s Bitcoin adoption reflects the broader tension between traditional financial institutions and crypto. While Bitcoin adoption poses risks for a developing nation, the move also empowers citizens with an alternative to unstable fiat. Instead of outright criticism, a balanced approach focusing on regulation and consumer protection might be more productive.