When asked about the potential reliability of cryptocurrencies compared to gold, Paul Goncharoff, chief manager of Goncharoff LLC, expressed uncertainty about whether Bitcoin will become as stable as gold.
This month, the prices of Bitcoin (BTC) and gold have both reached all-time highs. The value of an ounce of gold reached $2,222 last week, while the price of a token of the cryptocurrency surpassed $70,000 on Monday.
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The “perceived value of scarcity” of both gold and Bitcoin may have contributed to the price spike in March, according to Paul Goncharoff, chief manager of consulting firm Goncharoff LLC.
In an interview, Goncharoff said that although gold is expensive and “increasingly difficult” to obtain, it has been a “secure store of value” for thousands of years.
In contrast, Bitcoin is dubbed “the first true cryptocurrency” and has reached around 19,660,000 of its maximum token count of 21 million, all of which have already been mined.
“Once 21 million is achieved, that is it, no more new BTC appearing ever. How the real-time markets will respond should be an interesting study, and I am pretty sure there will be not one speculative ebb and surge related to BTC still to come,” Goncharoff explained.
However, he pointed out that although gold has always been known for being a secure investment during trying times, the “cryptocurrency world is still developing, albeit very rapidly.”
The idea that Bitcoin is “a haven similar to gold” is mostly the result of two causes, according to Goncharoff.
“One is its finite supply that I just mentioned, and the other is that ideally it is trustless, and as such protected against the political/economic whims of centralized authorities such as governments, central banks, and the like,” he elaborated. “It is felt by many to be the digital equivalent of gold, and much more efficient to hold and transfer as needed, being always controlled by the individual with the e-wallet, not a bank.”
It is also unclear whether Bitcoin will turn into a stable asset like gold. Goncharoff said, remembering how a prior joke by a “rather down-on-life developer” suggested that digital cryptocurrencies could be destroyed by a massive global electromagnetic pulse, but gold “will always remain.”
“The feeling of security is important, and as history has shown time and again, things always change. Governments, empires, banks, and even financial systems,” Goncharoff mused. “Cryptocurrencies have all the ingredients of a haven as they are decentralized and move freely, yet there still are risks, and these imply volatility, and frankly the market depth and liquidity while improving daily are still somewhat shallow.”
He said that there would be a strong reaction to attempts by centralized governments to “regulate and control what was created and developed to be decentralized and controlled only by supply and demand forces.”
“The more regulated and restricted traditional finance and currencies become, the more cryptocurrencies are seen as attractive, albeit risky, alternatives. Today we are seeing this begin to play out. This is a test for time,” Goncharoff said.
