Bitcoin is enjoying a boom currently. For the first time ever the cryptocurrency has exceeded the value of an ounce of gold. Yesterday, it closed at $1,262, while a troy ounce of gold stood at $1,233.
As of the moment of writing, Bitcoin is traded at $1,269 at the CoinMarketCap.
The unusual boost of the cryptocurrency price is linked to the increased demand in China, where authorities warn it is used to channel money out of the country.
At the beginning of 2017, when leading Chinese exchanges, Huobi and OKCoin, had to hold up withdrawals and other checks to appease the regulator, bitcoin traders started looking for ways out apparently flocking to peer-to-peer marketplaces to continue buying and selling the cryptocurrency. As a result, peer-to-peer Bitcoin hub LocalBitcoins set a new global all-time high across its platform.
Representatives of the People’s Republic of China and Chinese bitcoin exchanges conducted a meeting to discuss compliance and explore ways in which the latter can comply with the country’s regulations and form a regulatory partnership. Eventually, the actions of the People’s Bank of China led to Bitcoin strengthening.
It is repeated time after time that Bitcoin attracts many users because of its anonymity and ability to avoid government control.
Let’s only remember the failure of the website Silk Road in 2013 when the FBI and other agencies conducted raids amid allegations of drug dealing. Authorities seized millions of dollars worth of Bitcoin during the raids.
Both bitcoin and gold are considered to be alternative assets. However, they don’t usually trade in correlation. The moment is becoming even more important taking into account that gold is named the “gold standard” of alternative assets. Investors often use it to hedge against potential losses in more traditional assets like real estate and the stock market. It is notable that bitcoin has (at least temporarily) surpassed the price of gold.
At the very launch of Bitcoin, it was predicted to replace gold as the preferred alternative asset and store of value for investors one day. The time hasn’t come yet as Bitcoin is rather volatile and investors don’t feel confident investing in it. Thus, the current Bitcoin price boost we are observing could be a sign that the cryptocurrency is becoming more mainstream and investors are allocating at least some portion of their alternative investment portfolio to bitcoin.
Perhaps, it will become much easier to invest in Bitcoin once the SEC approves the Winklevoss bitcoin ETF. As the first bitcoin ETF in a U.S market it will make it much easier for both Wall Street and regular investors to buy the digital currency.