Cryptocurrencies like Ethereum and Bitcoin are on the rise. Supporters see them as the digital equivalent of gold – including inflation protection. Not all experts share this opinion.
There is – once again – a mood of optimism on the crypto markets. The second-largest cyber currency, Ethereum, marked a record high of just over 4600 dollars in the middle of the week. The undisputed number one among the cryptocurrencies, Bitcoin, remains within reach of its recently established record of just under 67,000 dollars.
The first-ever approval of an ETF on bitcoin futures in the US has given the entire crypto market a mighty boost in recent weeks. “Another supporting factor for the Bitcoin price is likely to be the currently increasing inflation concerns worldwide,” emphasises Sören Hettler, analyst at DZ Bank. For many Bitcoin supporters, the cryptocurrency is considered “digital gold”.
Parallels between bitcoin and gold
In fact, a closer look reveals some parallels between gold and bitcoin: For example, in both cases the creation of new units involves a high energy input. Moreover, both Bitcoin and gold are only available in limited quantities: Gold deposits on earth are finite, while Bitcoin’s algorithm sets the upper limit at 21 million units.
In contrast, central banks can create currencies like the euro, dollar and yen, so-called fiat money (Latin for “let there be”), almost indefinitely, virtually out of thin air. Experts are divided on Bitcoin “I can only advise anyone who is now afraid of losing their savings due to negative interest rates and rising inflation to consider investing in both gold and Bitcoin“, Julian Hosp, blockchain expert and advisor to numerous EU working groups, told tagesschau.de. An either-or decision is counterproductive, after all, diversification is essential in building a profitable portfolio.market expert Robert Rethfeld of Wellenreiter-Invest is more sceptical: “Bitcoin has only been around since 2009,” Rethfeld emphasises to tagesschau.de. “So cryptocurrencies have experienced an almost inflation-free period so far. There are no empirical values in this regard.”
What is the “safe haven” gold good for?
Gold, on the other hand, has built up its reputation as an inflation- and crisis-proof store of value over centuries and has survived various wars and financial crises, as DZ Bank expert Hettler notes.But in the eyes of Wellenreiter expert Rethfeld, gold is also only of limited use as a protection against inflation. “Normally, gold should have followed suit much more.” The yellow precious metal has been fluctuating around the 1800-dollar mark for months, and since the beginning of the year it has been down about nine per cent.
