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As the end of 2024 approaches, the investment world welcomes fresh air, with significant changes in asset storage preferences. For a long time, gold has been the primary choice for storing value. However, Bitcoin is now attracting attention and shifting gold’s position as the favorite asset among investors.
- 🚀 On 16 December 2024, the Bitcoin-gold ratio soared to 37.3 ounces of gold per Bitcoin, allowing 1 Bitcoin to purchase approximately 1,048 grams of gold, marking a significant milestone surpassing the previous peak in November 2021.
- 🏦 Increased institutional accumulation of Bitcoin and the influx of funds from Bitcoin ETFs highlight Bitcoin’s rising status as a crucial component of balanced investment portfolios, reinforcing its role as “digital gold.”
- 📈 Bitcoin exhibits much higher volatility (around 50% per year) compared to gold (approximately 20% per year), offering investors the potential for greater returns despite the increased risk.
- 🌿 Regulatory uncertainty and the substantial environmental impact of Bitcoin mining remain major hurdles, potentially affecting Bitcoin’s sustainable growth and broader adoption in the future.
Bitcoin Reaches a New All-Time High
In recent weeks, Bitcoin has experienced an extraordinary surge in value. This week, Bitcoin reached its new All-Time High (ATH), affecting the ratio between this digital asset and gold. This increase is driven by the growing interest from various institutions accumulating Bitcoin as the year ends.
On Monday, December 16, 2024, the ratio measuring how many ounces of gold can be bought with one Bitcoin reached an unprecedented high of 37.3 ounces. This figure means that one Bitcoin can now be exchanged for approximately 1,048 grams of gold, a historic achievement that marks a significant shift in the perception of the value of these two assets.
This ratio is slightly higher than during the previous crypto bull run, which ended in November 2021, when it reached 36.7 ounces of gold per Bitcoin. This increase indicates a more mature adoption and a rise in confidence in Bitcoin as a stable and potential asset class.
According to Sidney Powell, CEO and one of the founders of Maple Finance, this achievement of the highest ratio reflects the continued adoption of Bitcoin as an integral part of a balanced investment portfolio. Powell added that with the influx of funds from ETFs, Bitcoin is increasingly seen as a primary alternative in value storage.
Bitcoin vs Gold: A Better Store of Value?
The Singapore-based digital asset trading company QCP Capital stated that this increasing ratio reinforces Bitcoin’s status as “digital gold.” They assess that Bitcoin is becoming more popular than traditional gold as a store of value.
Many traders chose gold during economic uncertainty because of its more stable correlation with traditional markets. This is partly due to the approval of Bitcoin exchange-traded funds in the US in January, which boosted confidence in this digital asset.
Also Read: Gold vs. Bitcoin: Find Out Which Investment is Better and More Suitable for You
According to data from Coinglass, global Bitcoin ETF assets have reached US$119 billion or approximately Rp1,910 trillion. Meanwhile, the World Gold Council reported that gold-backed ETF assets reached US$290 billion or approximately Rp4,655 trillion in November 2024. Although this amount is still less than half compared to gold, the significant growth in Bitcoin ETFs indicates potential increased interest in the future.
One factor that distinguishes Bitcoin from gold is its volatility. Bitcoin has a much higher volatility, around 50% per year, compared to gold, which is only around 20% per year. Nevertheless, Bitcoin offers greater profit potential, attracting investors looking for higher growth opportunities.
Bitcoin’s limited supply is also an advantage. With a maximum of 21 million tokens programmed into the code, this scarcity adds value compared to gold, whose production continues through mining.
Bitcoin as a Hedge
Larry Fink, a prominent financial analyst, argues that Bitcoin meets the characteristics of a hedge against inflation and economic uncertainty. For example, during the COVID-19 pandemic, Bitcoin was considered an appropriate asset to protect value due to its limited supply.
History shows that society tends to turn to assets not tied to government jurisdictions, such as gold. For example, during the Great Depression in the United States, many people lost faith in the financial system and turned to gold as a more stable investment alternative.
Challenges Faced by Bitcoin
Although Bitcoin’s prospects look bright, challenges remain. Larry Fink noted that regulatory certainty is the crypto industry’s main issue. While regulatory leniency can benefit existing users, it may also hinder the entry of new investors.
In addition, the environmental impact of crypto mining is often scrutinized. At the beginning of 2021, it was reported that the annual electricity consumption required to mine Bitcoin was equivalent to the electricity consumption of the top 30 countries in the world, raising concerns about environmental sustainability.