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Is BITCOIN the New GOLD? | Behind the Cryptocurrency Phenomenon | ENDEVR Explains - YouTube
Channel: ENDEVR
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It seems like the sky is the limit when it comes
to Bitcoin. The cryptocurrency reached milestone
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after milestone in the last year and looks like it
is finally leaving the fringes of the tech-savvy
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young public to conquer the financial market. Many
young investors are starting to consider Bitcoin
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and other crypto coins as real alternatives to
Gold, the oldest safe-haven investment in the
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world. But does it make sense to treat them as an
alternative to good old Gold? Let’s take a look.
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It has been a hell of a ride for bitcoin
owners. After so many records and high-profile
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investments, it looks like cryptocurrency
is finally breaking into the mainstream.
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In October 2020, a team of analysts at the J.P.
Morgan Global Markets Strategy group touted
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Bitcoin as a gold alternative for millennials.
It predicted that prices could double or triple
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if the trend continued. It was a Friday, October
23rd. That day, Bitcoin was being sold for 13.1
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thousand dollars. The J.P Morgan
analysts` prediction was a turning
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point for the bank. Only two years earlier
the bank’s CEO called Bitcoin a fraud
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and that he would fire anyone trading it for
being stupid. Fast forward and here we are,
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hearing from the analysts of the legendary bank
that investing in Bitcoin was not that stupid.
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Looking at the development of bitcoin since then,
JP Morgan´s analysts prediction turned out to be
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conservative. Bitcoin would double in price in two
months, triple in January 2021 and by February,
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after Elon Musk announced that Tesla
invested $1.5 Billion in Bitcoin
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and was planning to accept it as a form of
payment, the cryptocurrency just skyrocketed.
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But the good momentum was not only a result of
a JPMorgan change of heart or Musks endorsement.
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Crypto is slowly being accepted as
a legit investment. Besides Musk,
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other investors and CEOs are also betting on it.
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In 2020, Paul Tudor Jones, a well-known Wall
Street hedge fund manager, said he invested almost
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2 percent of his portfolio in Bitcoin. Larry Fink
of BlackRock, the world’s largest asset manager,
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said in December that bitcoin
could become a “global market”.
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MicroStrategy, an American software company,
announced in December 2020 that it bought 650
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million dollars in bitcoin, totaling more than one
billion dollars invested in the cryptocurrency.
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Square, a financial payment company led
by Twitter CEO Jack Dorsey, announced
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in October that it was putting 50 million
dollars of its corporate cash into Bitcoin.
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PayPal also followed the trend and
announced that it would allow people
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to buy and hold Bitcoin as well
as a few other cryptocurrencies.
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There are endless examples of high-profile
investors and companies pivoting in the Bitcoin
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direction. To complete the wave of good news,
the Office of the Comptroller of the Currency,
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an American regulator, said
in July 2020 that banks would
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be allowed to hold cryptocurrencies for customers.
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With so many milestones being achieved, some
buyers are now treating the cryptocurrency
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somewhat like gold. Billionaire Mark Cuban, for
example, although not an enthusiast, declared in
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December 2020 that Bitcoin is investable and “a
store of value like gold that is more religious
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than a solution to any problem”. Instead of
trading in and out, investors are leaving their
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money on it. Similar to gold, bitcoin became a
way of keeping investments out of governments'
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influence and the traditional financial market
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answer this question, we need to understand both
the differences and similarities between them.
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The biggest similarity is that
both are finite resources.
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While gold is a mineral that is mined around the
world, Bitcoins (or any other cryptocurrency)
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are also produced by a process that is
known as “mining”, but on the internet.
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Gold production totaled 3,531 tonnes in 2019, 1%
less than the year before. And although there is
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no way to be sure, some estimates indicate
that there is only about 20% of the total
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amount of gold in the world still to be mined.
Meanwhile, as of February 8th, there are 18,6
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million bitcoins with the numbers changing every
ten minutes, when new blocks are mined. Each new
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block adds 6.25 coins into circulation. In total,
only 21 million tokens will ever be created.
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This means that more than 88% of available
Bitcoin in the world has already been mined.
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And we are fast approaching the finish line.
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Another similarity resides in the fact
that both gold and Bitcoin are assets that
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have little or no correlation with other
stocks or currencies. Monetary policies,
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central banks or governments cannot
directly control their value,
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even if indirectly their action can have an
impact on it. What matters to define prices
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is supply and demand. On top of that, neither
Bitcoin nor Gold, pay interest or dividends.
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But while they share these common characteristics,
one big thing differentiates these investments:
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gold has an actual, physical value attached to
it. Gold is valuable because of its historical,
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commercial and cultural use as well as its
anti-corrosive and conductive properties.
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Bitcoin? Well, the enthusiasts might think this
is not true, but scarcity in itself does not give
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a thing value. Bitcoin’s value comes mainly
from the expectation of the future and the
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belief that eventually its use will be accepted
and widespread, therefore increasing its cost.
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Fact is: Bitcoin is still a speculative asset in
a largely unregulated market. And using Bitcoin as
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cash is not yet a natural process. People do not
have the confidence undertaking large transactions
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in bitcoin. Crypto in general is still far too
inefficient to be of much use for making payments.
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For example, Bitcoin is capable of processing
fewer than ten transactions per second.
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For every crisis or turbulence, investors
know that traditional investments like
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government bonds will not bring the
expected results and pivot to gold.
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They search for a real asset that cannot
lose its value by relentless supply of money.
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This is not yet the case with bitcoin.
Its price is much more volatile and has
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recently moved with the stock market, which
is different from a supposed haven like gold.
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On top of that, the cryptocurrency trade is
a market where fraud and theft are rampant.
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Crimes such as selling drugs online have been
facilitated. And there were cases of even
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terrorists using crypto. People have used tokens
to bypass laws and capital controls. Countries
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like North Korea, Venezuela and Iran have
also used the cryptocurrency to evade American
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sanctions. The Security Exchange Commission has
sued blockchain payments company Ripple, accusing
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them of selling unregistered securities after the
company sold the cryptocurrency XRP to investors.
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Owners of BitMEX, the world’s largest
cryptocurrency trading exchange,
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are facing criminal charges for
allegedly using laundered money
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and allowing other illegal transactions.
Janet Yellen, US secretary of Treasure,
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said that cryptocurrencies used for illicit
purposes are a growing problem in the world.
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Some investors still aren’t sure about what to do
with the new phenomenon. As Mark Cuban summarized:
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“A banana has more utility, potassium is a
valuable nutrient to every person on the planet,
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but as long as people accept bitcoin as a
digital version of gold, it's investable”.
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To invest in bitcoin, one needs to believe in
the value of it. To be honest, this is also
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true for other investments as well. But when it
comes to stocks and bonds, for example, there
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are legitimate mathematical models to determine
their value. Stocks produce earnings and bonds
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produce income. This is what determines their
value. The same cannot be said about bitcoin.
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It’s still an unanswered question of how a
modern asset like crypto will fit into legal
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structures dating back a century and how it
can turn into a real safe haven. The progress
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witnessed in the last years makes it easy to
believe that these financial structures will
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eventually adapt to the new model and crypto
will be broadly accepted and easy to deal with.
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And maybe even becoming a safe haven investment.
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However, there is no guarantee that will happen.
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Until then, comparing crypto and gold still seems
like a matter of faith more than anything else.
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So that’s it for this video. We hope
you enjoyed learning more about the
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differences and similarities between gold
and bitcoin. Since you made it to the end,
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click around and keep watching. We hope you
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