Why is the comparison between Bitcoin and Gold irrational?

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The comparison between Bitcoin and Gold is as mainstream as Bitcoin is. However, despite the decoupling of the two assets, the group of interested and active investors is almost the same and overlapping. In fact, Crypto-Twitter traders and analysts have been working on both assets for over three years now.

Chief Economist & Strategic Officer at Rosenberg Research & Associates Inc. David Rosenberg is one of these analysts, with Rosenberg commenting on the same subject through a tweet dated 15 January 2021. He considered the popular comparisons between #Bitcoin and #Gold and wondered if they were absurd. No one ever talks about the risk that Gold might be zero, according to Rosenberg, because it can’t.

However, we may have gone a long time past the stage where Bitcoin could go to zero, back in 2013. With every bitcoin halving, the price has risen higher and there is only appreciation and vertical growth on the price charts. That is why the price has never dropped to pre-half the previous cycles.

Are comparisons between Bitcoin and Gold absurd?

Bitcoin market cycles || Source: Medium

Price trends in consecutive market cycles may provide sufficient evidence of price appreciation. However, contrary to what Rosenberg has suggested, the comparison between Bitcoin and Gold may not be completely absurd.

Are comparisons between Bitcoin and Gold absurd?

Bitcoin v. Gold || Source: Twitter

The comparison exists and cannot be denied, despite the decoupling and tonnes of parallels that have been drawn between the two assets. Rather than being absurd, comparisons are like goals. They’re making bitcoin more mainstream and driving adoption. In fact, one can argue that the whole narrative of “digital gold” is meant to drive adoption.

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These comparisons do not require a price copycat rally. So, what is the value added for a retail trader that follows these narratives through different phases of the market cycle? Well, the Gold Fractal of the 1970s, which has been popularised by the media, is something similar, and can be seen as the ideal or goal of the Bitcoin price rally.

Increased stability and acceptance are key to such comparisons. HODLing gold has provided relatively high returns compared to stocks and real estate to some extent, and Bitcoin’s risk-adjusted returns are better than other mainstream assets. As long as the risk-adjusted NVT is higher than other assets, Bitcoin will not be zero or near zero.

Source: Coinstats

However, it would be a cause for alarm if institutions started selling and exiting in tranches, but this is not happening at the moment, at least not in the charts. Looking at current price charts and trade volumes on both on-site and derivative exchanges, this seems to be an unlikely alternative. The comparisons between the two assets may continue well into Bitcoin’s maturity and the fourth half, but the short-term impact on the portfolios of traders will be positive, based on the drawdowns and narratives of the current price rally.

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