Cryptocurrencies continue to draw a lot of attention as a better and more secure option for value transactions compared to what banks offer. Some even think that it had reached a point where it became more superior to traditional currencies. This confidence is due to the blockchain technology that makes crypto transactions possible. And, since cryptocurrencies do not rely value on traditional currencies, it is not easily affected by changes in currency values. This characteristic makes it similar to Gold. As a result, there have been various concepts/ideas on the relationship of Gold to Crypto.
Gold and Crypto Inverse Relationship
According to Lear Capital, some experts have seen an inverse relationship between Gold and Crypto during the time when Bitcoin value slowly reached its highest. The value of Gold was going down. And as what we have seen, after hitting its highest, the value of Bitcoin, went down drastically, until it reaches almost half of its highest value. During these times, Gold is slowly regaining its strength.
The value of Gold continues to rise during that time until its value slowly dropped to its correctional level. And closely enough, it was when Bitcoin was slowly regaining its value and hitting its safe level as well.
Additionally, there was an instance in 2018 when the dollar currency value was pulling back, Gold moved higher as predicted. However, on the other hand, Bitcoin was not able to ride alongside Gold, instead, it went down.
Crypto Could Rely on Gold
As mentioned earlier, what made cryptocurrency successful and safe is blockchain technology. It’s made possible with the implementation of complicated encryption algorithms. With this technology, digital transactions are securely validated using a distributed computer network.
This goes to show that cryptocurrency also relies on the power of a computer, especially graphic cards. More and more computing power is needed in order to mine cryptocurrencies. And since modern computer relies on various metals to function which includes Gold, many are speculating that there will come a time that its value will soon rely on metals like Gold.
Both serve as Digital Currency Protection
When it comes to Digital currency protection Gold has already proven to be a reliable option. This is what cryptocurrencies like Bitcoin are trying to achieve. A lot of crypto enthusiasts are optimistic that there will come a time that we would not only rely on gold during currency devaluation. Bitcoin can also become a safe option for investors when traditional currencies become weak.
In 2018, there has been an increase in the trend of Gold-backed cryptocurrencies. This move is to eliminate the volatility of crypto. One of the main reasons why you should not easily invest in crypto is its volatility, it might have a high-value today but you’ll never know when the value would go down significantly. To deal with this volatile nature, cryptocurrency connected with Gold and these are now considered as “stable coins”.
Whether or not these concepts are true or would come to reality, these simply show that crypto will stay for a longer period of time. It had attracted enough attention and maybe have already survived its worst. And crypto being correlated to Gold is something that many crypto enthusiasts see as a positive sign.
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