Written by Matt Morgan at The Daily Bell:
Bitcoin has been called “digital gold” for years (along with everybody else in this space). This fall, it finally started acting like it, and not always in the ways we hoped.
Some of those lessons stung. But one of them might be the most bullish thing to happen to Bitcoin all year.
Gold bugs have known this one for decades. Since the VanEck Gold Miners ETF launched in 2006, gold has turned $100 into about $600. Seems… OK, but when you look at how the miners performed. It’s less than ok. They’ve turned $100 into roughly $247.
Now Bitcoin holders are getting the same education. Since January 2021, Bitcoin has turned $100 into about $243. An even split of MARA and CleanSpark has turned it into about $47.
Here’s the reason:
A miner isn’t money, it’s a business, and businesses have bills. 24/7 Wall St. nailed it last month:
“Rising power costs, financing needs and share issuance sit between a commodity’s price and a miner’s earnings.”
Every time a miner sells new shares to cover those bills, your slice gets thinner. So the takeaway is pretty simple: if you want the money, own the money.
Not that owning the money felt great in October.
Yahoo Finance reports:
“Gold ended its worst October since the 2008 financial crisis at $3,875 an ounce on Friday.”
That leaves gold about 27% off its January record of $5,318. Bitcoin is down too, and the two of them now rank dead last among major assets this year. When traders get margin calls, they don’t sell what they want to sell. They sell what they can.
Safe havens included.
Here’s the good part:
Bitcoin is growing up.
Its price swings over a full year once topped 100%. Today they sit around 44%. Gold, meanwhile, has gotten jumpier, with its swings climbing to about 28%. The gap between the two is about as narrow as it’s ever been.
That new maturity got a real stress test on October 29, when Binance, the world’s largest crypto exchange, got drained.
The Block reports:
“Blockchain analytics firm Chainalysis estimated that roughly $5.9 billion was stolen at the time of the theft.”
And Bitcoin’s response?
“The world’s largest cryptocurrency dropped 4.5% over the past 24 hours to trade at $76,664.”
That is, frankly, impressive. Back in 2014, when Mt. Gox imploded Bitcoin’s credibility faced a “make-or-break moment.” This time the market shrugged and moved on.
Here’s why it shrugged. Hackers can steal coins off an exchange, but they can’t print new ones. The 21 million cap held, the same way gold’s scarcity has held through every crash in history.
Sound money has never been about a price that only goes up like assets held in an inflationary environment. Scarcity is built-in to Bitcoin just as it is gold, silver, platinum, land, and art…Gold, has especially earned that trust over a few thousand years.
Bitcoin is earning it one hack, one drawdown and one stress test at a time.
