Bitcoin vs Gold: Which did better in 2016?

The two contemporary safe havens during the times of economic crisis are the representatives of tradition and technology. While gold will always be the first choice of safety net for a purist, the millennials believe bitcoin to be the new gold or the digital gold.

And seems it is truly a digital age, as proved by recent bitcoin high over gold.  The world is increasingly turning to bitcoin as a safe haven.

Nonetheless, the demand for gold invariably skyrockets every time something disrupts the world markets. 2016 was no different. At least the first half of the year turned out great for gold investors. Turns out gold’s ‘intrinsic value’ and reliable store value did attract people and even yielded results.

Gold further surged following Brexit and even hit its 2016 high during July, at $1,364. It was further touted to rise following Trump’s election as the US President. The US election results which took the world by surprise and world markets by insecurity, did cause a temporary jump in gold prices, but they ultimately fell nearly 20% in the last half of 2016.

And as Chinese Yuan Devaluation turmoil escalates, Chinese people are increasingly favouring bitcoins over gold. The decision by Chinese authorities to restrict the importation of gold in order to prevent capital leaving the country has further spiked the demand for bitcoins.

Even though bitcoin started 2016 off on a weak note, its steep rise following the Brexit, the US elections and the Chinese Yuan crisis has cemented its status as a new age safety haven.

Other events such as the demonetization of banknotes in India and Venezuela, crackdown on Wealth Management Products and tightening of capital controls also played a strong role in the rising price of Bitcoin.

Moreover, Vinny Lingham, co-founder and CEO of, in his highly anticipated blog post titled “Bitcoin 2017: A Currency Devaluation Hedge for Emerging Markets” highlights the impact of rising Federal Reserve rates on the value of Bitcoin.

He wrote, “Essentially, the higher the rates go, the higher the demand for Bitcoin will be. The divergence that you see is happening because Gold has been heavily favored by Gold bugs for historical reasons, in times of crises, etc,  as the go-to commodity based store of value if an economic collapse happens, etc — which was often followed by a period of low-interest rates and then inflation.”

Lingham also mentions the hollow supply interval between $800-$900, which promptly propelled the price of Bitcoin to over $900. The price of Bitcoin at the moment is at $958, keeping an upward trend towards $1,000.

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Nasdaq columnist Martin Tillier on Thursday interconnected dots between the recent financial events and Bitcoin value.

In his article, the foreign exchange veteran noted a lack of buying interest towards Gold among traders during the recent Chinese stock market crash. It was unusual for a commodity whose price used to rocket during these economical meltdowns. However, at the same time, another commodity was found breaking the tropospheres.

Bitcoin, whose value started to surge the same day when the Shanghai Composite Index’s collapse began, was reportedly stealing the gold’s thunder. By the time the Chinese market stabilized — after one month — Bitcoin was also stabilized, after rising around 30% in value. The gold’s value, during this time, was crawling sideways, with head toward bears.

A part of the surge in Bitcoin’s value was also credited to the Greece debt crisis. However, the reports were mostly speculative, for the BTC/EUR trade never showed any increased trading activities, and the Greeks themselves had no means to purchase the digital currency amid a well placed capital control.

“We can see that a) In the past gold has soared in times of financial crisis; b) Confidence in both the Euro and Chinese stocks fell at the same time in June; c) at the same time the price of gold was falling; and d) at that time the price of Bitcoin was increasing,” Tiller stated. “Logically, all of that suggests that Bitcoin has replaced gold as the safe haven of choice in times of trouble.”

Still Speculative

In one of our articles from the last month, we had speculated that the surge in Bitcoin value was more noise than music. The pump in the value could have been induced psychologically, thanks to a great digital currency community that presents Bitcoin as the utmost solution to anything that seems unfair in the traditional finance infrastructure. Martin Tillier somewhat said the same, stating that correlation doesn’t always yield causation. Excerpt:

“It seems to me that while the case for Bitcoin as a safe haven isn’t proven, there is enough evidence to make owning some as insurance against the inevitability of another recession a smart move.”

Its a smart opinion!

In one of its first steps towards creating an unconstrained economy, the State of Texas has decided to setup its own gold-backed bank.

The decision comes in the wake of Governor Greg Abbott’s decision to repatriate $1 billion worth of state’s gold from an underground vault in New York. The republican plans to store this gold in a ‘yet-to-be-built’ facility, a step that will circumscribe taxpayers’ money from leaving Texas and will further circumvent the controversial Federal Reserve System.

This means thats the Texans will be able to conduct gold-backed transactions to pay for goods and services, and will further be exempted from paying fees to store gold outside their state. The government, on the other hand, will be able to objectively secure and stabilize their commodity reserves.

Rep. Giovanni Capriglione — the author and sponsors of the proposal — told the Texas Observer that their bill has not received the media coverage it deserved, considering that it will create a first-of-its-kind state-level Bullion Depository in the US that will empower people with facilities to “use assets in [their] vaults the same way [they] use cash”.

Bitcoin Accepted

While Giovanni made sure to threaten Feds by all means, his host — Radio Jockey Rick Wiles —took the opportunity to ask the representative about the possibilities of a “Texas-style Bitcoin,” a decentralized digital currency whose followers often go after the capitalists for monopolizing finance markets. As Texas and Bitcoin seems to be sharing a common ground here, Wiles’s question literally hit the right node, to which Giovanni replied:

“OK! That would be awesome too. I personally own Bitcoin. You could make transactions with Bitcoin, use the gold depository as a medium, and then make payments on the other side. This is the biggest threat in 102 years to the Federal Reserve System.”

While the comments on Bitcoin seem more instant than official, it would still be interesting to see how Texas plays out its private reserve theory with the help of a digital currency. In a best case scenario, they might adopt Bitcoin; in worst, they might just create their own. Its open-source, after all!