Gold’s Monthly Returns Beaten by Bitcoin

For the first time since Q2, Bitcoin has logged higher monthly gains than gold. The last few months have seen several goldbugs gloating as their chosen store of value beat Bitcoin. Now that October is in the books, we can see that Bitcoin delivered 10.26% gains over the month, and gold had a modest 2.74%. 

Earlier in the year, Bitcoin trounced gold for 3 months in a row as it began what many thought was going to be its next bull run. The last three months showed negative returns for Bitcoin, likely because investors were selling it off after the state of Facebook’s Libra project began to be brought into question. With the Fed signalling that it would be waiting a little longer before making any rate cuts, the fundamental analysis of crypto remains fairly neutral at this point. 

It is easy to put these two sets of returns against each other and call one a winner, but the more important takeaway is that there is a ton of volatility in the space. What this may signal about the broader economic climate is important and will likely prove to be relevant as things accelerate in the future. 

Different Use Cases

Often thought of as being in constant competition, this helps make the case that Bitcoin is at least as strong a performer as gold. The longer-term argument is that Bitcoin still has a lot more upside because of the fact that it hasn’t reached a global equilibrium yet. 

Although there are other cryptocurrencies in the space that are also thought of as competing with gold, such as Bitcoin Cash, Litecoin, Zcash, or Monero, Bitcoin is where most of the competition is perceived. According to CoinMarketCap.com, the world’s largest cryptocurrency currently has a market capitalization of $167 billion. This is many multiples larger than any other altcoin, and makes it the de facto leader of the crypto world. 

Some currencies, like Ripple or Stellar, may be considered to be competition for Bitcoin, but they are competing for a different use case: medium of transfer. Medium of transfer and store of value are two use cases that USD fulfills today, and by unbundling these two functions, it is theorized that a better outcome can be brought about. 

Chinese Interest Lackluster

Even though last week may have seen some positive developments for the crypto world coming out of China, those sentiments have been tempered a bit this week. The ruling political party released an article pointing out the difference between being pro-blockchain technology and being ready to speculate on cryptocurrencies. The remarks read: 

“Blockchain’s future is here but we must remain rational. The rise of blockchain technology was accompanied by that of cryptocurrencies, but innovation in blockchain technology does not mean we should speculate in virtual currencies.”

This isn’t necessarily a walking back of their policies, but they are definitely promoting a cautious approach, as well as a separation of the two major ideas. Bitcoin’s price climbed upwards of 40% after comments from China’s President, Xi Jinping, were publicized. AFter the initial jump, the price correct downwards by approximately 15% and now is continuing to trend horizontally. 6 of the last 8 Novembers have seen positive price developments for Bitcoin, so we’ll just have to wait and see what happens this year.