Gold is the ultimate store of value and it is emerging that central banks are purchasing them at a faster rate, last recorded in 1967 as they bid to shore up their reserve, and in some cases, boost their economic stand.
Banks Bought $27.7 Billion Worth of Gold in 2018
According to the World Gold Council (WGC), central banks bought more Gold in 2018, at a faster rate than at any point in time since 1967. Last year, central banks bought 651.5 MT of Gold, a 75 percent rise meaning central banks held 34,000 MT of Gold by the end of 2018 according to WGC data. In fait terms that’s a whopping $27.7 billion or around 33 percent of Bitcoin’s market cap. Although one may argue that they were ramping up as a safety net for increasing debt, there could be other explanations.
Clearly, these apex financial institutions could be purchasing the Gold as a safe haven for a protracted crisis—part of which they may be contribution through QE. While the United States and other countries continue to ramp up, increasing debt, their Gold purchase could be to shield, a counter measure of their creation.
Similarly—and with a diverging objective, as a cautionary measure against sanctions, economies like Russia, Iran, Venezuela are cushioning themselves against damaging shocks by shoring up their Gold reserve.
Here’s Why Bitcoin is a Better Alternative
Even so, ordinary investors should find refuge in Bitcoin, a 21st century digital Gold. It has several advantages including being global and better still projected to be premier money in less than three decades. Then again, there is a lot to be drawn from crypto, blockchain and Bitcoin. The pioneering asset is a product of the 2008 GFC. Since the crisis had a cascading effect, dragging the global economy to the dredges, Bitcoin became a preferable alternative for many. It has now evolved into a store of value, a medium of exchange and well, a settlement layer, competing against Visa and other centralized processors.
Satoshi Nakamoto had a clear intention of taking away financial control from the banks and hand it over to the people through decentralization which was made possible by blockchain which is now powering no less than 2000 applications. This is hence, the reason why some cryptocurrency enthusiasts are buying Bitcoin at the moment.
In the advent of an economic meltdown, Bitcoin could provide the cover most people need and save their wealth against the wrong decisions central banks are making. Nakamoto also designed Bitcoin to be deflationary. This implies that the purchasing power of the cryptocurrency will be increasing over time.
The cryptocurrency’s design is to ultimately make it a better store of value since it is scarcer than Gold. Economists have since concluded that it is an excellent store of value thanks to Lindy’s effect and Network Effect that would take it global. Besides, it is not hard to see why the 21 million maximum cap of Bitcoin makes it an even better store of value than Gold.
As of July 2018, Bitcoin inflation rate stood 4.25 percent. Considering its architecture, it would continue dropping until it reaches zero. While banks are buying more Gold to protect themselves from economic instability, cryptocurrency enthusiasts are doing the same through a better, global, valuable, scarce and a better store of value in Bitcoin.