At the start of the weekend, Bitcoin abandoned the double-digit gains of the beginning of the week and dropped below the key psychological $40K mark. Data from Santitment shows that Bitcoin and gold are vying for the top role as a store of value amid continued world uncertainty.
Looking at the charts, it is clear that as the possibility of war increased, both Bitcoin and the S&P fell, while gold gained almost 4%.
Bitcoin and Gold in 2022
The moment Russia invaded Ukraine, gold jumped to its highest price since August 2020. In contrast, despite being cited by Michael Saylor, CEO of MicroStrategy as the superior store of value, BTC is down 14% on the day.
However, gold’s dizzying rise and Bitcoin’s drop on February 24 is not the whole story. Gold gave up gains almost immediately and Bitcoin rallied more than 17% as Ukraine announced it would accept Bitcoin and ETH donations. Cryptocurrency donations to Ukraine are instantly liquidated for fiat trading as the government does not accumulate crypto. They sell as soon as they receive it in their wallet. Accordingly, the need to finance war creates selling pressure in the market.
So the roller coaster continues this weekend. Yesterday, gold overtook Bitcoin as the price climbed back to a local high of $1,974. While gold is just 5% below ATH, a level that will likely be stiff resistance, Bitcoin is trading closer to historic support levels at $37,700 and $35,254. It will be interesting to see what happens next, but which of these really influences the argument Bitcoin is the most important store of value?
Which store of value is superior?
The controversy between gold and Bitcoin over the role of a store of value has been a popular topic for many years now. However, while Bitcoin’s growth potential clearly shows that it is capable of outperforming gold, the king of crypto has yet to be proven as the de facto store of value in turbulent times.
Bitcoin is too risky to be used as a safe haven or store of value. Bitcoin fails its first major test. I think it won’t get a second chance.
It is the wrong approach to look at microeconomic events on individual days to make statements regarding the long-term store of value. We need to zoom out the charts and see how fast the blockchain space is growing. There are many who expect the global market size to reach $67 billion in just 4 years, representing a compound annual growth rate of 68.4%. Furthermore, Bitcoins can be sent to family, friends, and charitable causes from anywhere in the world.
While gold has been a global store of value for millennia, holders cannot transfer it to their families via mobile phones. Conversely, you can transfer the value of Bitcoins to your loved ones within minutes.
This opens up the debate about what constitutes a store of value in 2022? If the store of value can protect us from the day-to-day volatility of the market, the chart above shows that neither gold nor Bitcoin has passed the test. On the other hand, if a store of value is something that can maintain or increase in value for a long enough time, it seems that Bitcoin has not completely failed this time.