The current financial markets selloff is a sobering moment for ardent proponents of Bitcoin as “digital gold” — the modern replacement for gold (the precious metal commodity) as a store of value and an inflation hedge. Bitcoin is failing the test on both fronts.
Inflation is rising sharply, to levels not seen since the early 1980s. And the price of gold is holding steady, as it is expected to be — its price is more or less unchanged year-to-date, hovering around US$1,800 an ounce. Bitcoin, on the other hand, has fallen more than 36% from US$46,300 at the start of the year — and peak of nearly US$69,000 in November 2021 — to less than US$30,000, at the point of writing. Far from acting as a stable store of value, the world’s oldest decentralised cryptocurrency is trading very much like a risky asset, indeed, resembling more of a highly speculative tech stock (see Chart).