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Updated 23:00 16/10/17

Is one Bitcoin really more valuable than an ounce of gold?

14 Mar 2017 By Samuel Gee

With the pound on its worst run since August and plenty of indications of a downturn in the UK economy as Theresa May moves to trigger Article 50, we predict an increasing interest in safe-haven investments in the near future. One asset whose popularity is rising is bitcoin. The cryptocurrency's value has risen dramatically in the last twelve months, and some advocates view bitcoin as the currency of the future. Bitcoin has drawn attention recently as the price of one coin rose above an ounce of gold. It is currently trading at £1019 per bitcoin.

However to consider bitcoin a viable alternative for gold seems premature. As a digital currency with no material value, it is hard to see how bitcoin varies from other fiat currencies in terms of security. Can a digitcal currency match the safety of a physical asset with a high intrinsic value? Gold may currently be priced lower, can we really argue that its intrinsic value is lower than that of bitcoin?

History demonstrates that bitcoin is unlikely to hold this position for a sustained amount of time, with dramatic swings in its price characteristic of the cryptocurrency.The lack of regulation in the bitcoin market means that there is a considerable risk attached to bitcoin, with its price being extremely volatile and vulnerable to manipulation.

The digital currency suffered a setback on Friday when the Securities and Exchange Commission rejecting a proposal to establish a bitcoin ETF on Friday, citing a lack of regulation as a major concern. The approval of such an ETF would have made bitcoin far more accessible, boosting demand and thus its value. 

The decision saw bitcoin’s value plummet by more than 15% on Friday. Although the bitcoin price has almost fully recovered since then, this drop demonstrates the vulnerability of an asset that is struggling to truly establish itself as a mainstream form of investment. Compared to gold, an asset that has maintained a high value for thousands of years, the volatile and unpredictable bitcoin appears more a speculative punt than a reliable long term store of wealth. 

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