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By Charlie Morris, CIO, ByteTree Asset Management
The idea is that bitcoin is the new gold. It is secure and robust, with a fixed supply not dissimilar to gold. Given enough time for it to catch on, it will surely supersede gold. Or will it? In terms of security and supply, gold and bitcoin are equals. But having followed the gold market for 23 years and bitcoin for 8, the differences become glaringly obvious. In terms of demand, their dynamics are poles apart. When people think about bitcoin, their first thought is likely to be how risky it is. It is cyclical, high beta and volatile. This is true, but it surprises many that the volatility has been structurally falling despite recent events. This last price crash has seen 90-day volatility of 70%. In 2018 that was 90%, and in 2013, 150%. In crypto, we call that progress.
Gold and Bitcoin volatility
Source: ByteTree
The reason for the volatility is the variable nature of demand. Much of it has been speculative, but over the years, bitcoin has started to witness a value buyer. Gold has low volatility because it has many different value buyers with deep pockets. When the price falls, there is no shortage of interest from central banks, family offices, retail, industry, and jewellery. That limits gold price movements as there are many…
