Bitcoin vs. Gold
Bitcoin to Gold Ratio
Interpretation
The ratio in the chart above divides the price of Bitcoin by the price of Gold and represents the number of ounces of gold it takes to buy a single bitcoin. When the ratio rises, bitcoin is outperforming gold - and when it falls, gold is outperforming bitcoin. The chart's yAxis is logarithmic for better visualization and to cope with bitcoin's parabolic advances over time.
Bitcoin was launched in 2009 by Satoshi Nakamoto who's true identity remains unknown. According to Satoshi's whitepaper, bitcoin promises to be the first purely peer-to-peer version of electronic cash without having to rely on any financial intermediary. Like gold, there is a limited amount of bitcoin. Programmed in the source code, there are a limit of 21 million tokens as well as halving events, which reduce the supply of bitcoin by 50% - ensuring that the final bitcoin won't be issued until about the year 2140. Through an innovative incentive structure, so called "miners" compete in solving a math problem and get rewarded in bitcoin - securing the network and verifying transactions in the process.
Bitcoin and gold are frequently compared as investment assets. Gold has a longstanding reputation as a dependable store of value, often utilized as a hedge against inflation and economic uncertainty. Bitcoin, on the other hand, has emerged as a digital store of value in recent years, garnering attention for its limited supply and decentralized nature. While gold offers stability and tangibility, bitcoin provides advantages such as divisibility, portability, and transparency through its digital infrastructure. Both bitcoin and gold are commonly viewed as means to diversify a portfolio and hedge against inflation resulting from fiat currency debasement.
Data Sources
- Stooq: Bitcoin Cryptocurrency USD (BTC.V)
- Yahoo Finance: COMEX Gold Price
Further Information
- TradingView Chart: Bitcoin to Gold Ratio
- andersbrownworth.com: Blockchain Demo
- bitcoin.org: Whitepaper
- Investopedia: What is Bitcoin?
- LongtermTrends: M2 Money Supply Growth vs. Inflation
- LongtermTrends: Stocks vs. Gold and Silver
- LongtermTrends: Ethereum vs. Bitcoin
- LongtermTrends: Bitcoin vs. Nasdaq
Bitcoin vs. Gold Price Changes
Interpretation
This chart gives a different view of the data from the chart above, comparing the percentage change between the prices of Bitcoin and Gold over time.
Data Sources
- Stooq: Bitcoin Cryptocurrency USD (BTC.V)
- OnlyGold: Historical Gold prices
- Yahoo Finance: COMEX Gold Price
The Correlation Between Bitcoin and Gold
Interpretation
The chart above displays the 1-year rolling correlation coefficient between the price of Bitcoin and the price of Gold. A correlation coefficient of +1 indicates a perfect positive correlation, meaning that the price of bitcoin and the price of gold moved in the same direction during the specified time window. Conversely, a correlation coefficient of -1 indicates that they moved in opposite directions.
Diversification is the practice of spreading investments across different assets to reduce risk. In his book Principles, Ray Dalio called diversification the "Holy Grail of Investing". He realized that with fifteen to twenty uncorrelated return streams, he could dramatically reduce the risks without reducing the expected returns.
Bitcoin vs. Gold Market Capitalization
Interpretation
This chart compares the total market capitalization of Bitcoin with Gold. Bitcoin's market cap is calculated by multiplying the current price with the circulating supply, which follows a predictable halving schedule programmed into the protocol. Gold's market cap is calculated by multiplying the current price with the total above-ground stock data from the World Gold Council.
Data Sources
- World Gold Council: Above-ground stock
- Cointelegraph: The mathematics of Bitcoin halvings
Further Information
- 8marketcap: Assets ranked by Market Cap