According to Axel Merk, President and Chief Investment Officer of Merk Investments, some gold investors are now turning to cryptocurrencies.
Gold investors prefer this cryptocurrency
Axel Merk and his team recently launched the VanEck Merk Gold Trust (OUNZ), which allows investors to deliver real gold. In discussions of this gold market, Merk cited findings that some investors say are moving to crypto:
As far as the gold investor is concerned, I group them into three different groups. One is the investor who worries about the dollar’s purchasing power being eroded. The second is the diversification investor and the third is the trend follower.
The third group, trend followers, love a trend and jump on board when the gold price moves. These investors have now mostly turned to meme stocks and other products, cryptocurrency and other markets. On the other hand, we can say that Bitcoin and the Dollar Power Index (DXY) are significantly correlated, allowing Bitcoin to fulfill its “purchasing power” role.
Why Bitcoin?
Bitcoin is usually a disconnected or standalone investment or asset. That makes it a useful addition as a diversifier, but as a gold ETF manager, Merk naturally says they’re all speculators going for Bitcoin, and apparently it’s good for gold:
The investor, the group that transitioned from gold to cryptocurrencies, was a speculator, right? So, if anything, the effect was that the volatility underneath was less than it would normally have been because during the boom phase and the cryptocurrency phase, steroid-using investors have other ways to play. This, in turn, could mean that the price of gold could rise but also become more volatile and then fall further. So it had an effect in both directions.
The important thing about volatility is that the floor and Bitcoin’s bottom have been higher than previous dips so far, which ensures that volatility is generally on the upside. Additionally, Merk has no way of knowing if gold depositors are speculators, as he does not cite any surveys or provide any evidence for his claim.
However, he admits that they broke up, that Bitcoin “has had an impact” and that as an ETF manager he probably has data on this. Yet gold still has a central bank reserve market that Bitcoin has not yet touched as far as Bitcoin is known, and as long as that remains the case, crypto is not a real threat.
Central banks and Bitcoin reserve preference
If there are reasons for central banks to hold Bitcoin as well as gold, then we could move in the opposite direction in market cap, according to experts. The main advantage of gold over Bitcoin is that the seniors responsible for these decisions are familiar with it and it is a physical commodity. But anyways, cryptocoin.comSome experts, whose analysis we have shared, are confident that gold will be bigger than Bitcoin.
However, the physical nature of gold is also its main drawback. It is almost impossible to pay with gold online without an intermediary who can inflate the gold at will, and it is difficult to pay offline. Therefore, Bitcoin has more benefits while largely fulfilling all the functions of gold, thus the crypto market continues to attract many gold investors.
