$368 Million in Gold Falls From Airplane, Bitcoin’s Advantage Over Traditional Assets

There have been a lot of stories in the news about people throwing away fortunes in Bitcoin as part of the general hysteria around cryptocurrency but a recent incident in Russia where a plane lost tons of gold and silver shows that hard currency is just as likely to go missing.

Russian Plane Drops Payload of Gold

The story of the British man who threw away a hard drive with 7,500 Bitcoin on it in a landfill and then sought permission to comb through the 350,000 tons of rubbish has been in the world press since late 2017.

There is also the story of the Hypnotherapist in the US state of South Carolina who charges one Bitcoin plus %5 of recovered funds to put people under and regress their memories in order to recover forgotten passwords.

These stories often come under headlines like the craziest things people do to recover lost Bitcoin and are written in a way to highlight that it’s not just the people that are crazy but the idea of Bitcoin and digital currency in general.

This presumption leaves out the fact that people, institutions, and governments lose huge amounts of fiat, hard cash all of the time.

Just yesterday a Russian Cargo plane that had stopped to refuel on its way from a Siberian gold mine lost part of its payload of over 200 bars of Dore, a gold-silver mix.

The 3.5-ton weight of bars were scattered over a remote area that was immediately closed down so locals couldn’t make off with any of the precious metals. In the end, officials reported they have recovered all of the 172 of 200 bars that fell from the plane without giving any details of how.

US Military Turned to Electronic Payments

That may be just one isolated instance of a freak accident but there is the ongoing situation of US payments and cash hordes kept in Afganistan and Iraq during wartime activity gone missing.

Audits going back ten years continually show huge amounts of US dollars, usually as pallets of cash simply disappearing from ‘secure’ locations. In one case alone $6 billion went missing from an Iraqi bank.

The majority of this money was earmarked for salaries of Iraqi and Afghani service men and contractors working along the US forces as well as cash kept on hand to pay for equipment and supplies.

Eventually, the US government decided to end the problem of skimming and outright theft by paying electronically. Sending money directly to contractor and service men’s bank accounts.

So what is the safest way to store and move currency, an encrypted string of numbers or a pallet full of paper?

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FOMO Moments

The pullback after a couple of days in the green is becoming a regular pattern now. Markets can’t seem to garner any serious upward momentum and have been relatively flat and slightly down for a few weeks now. Bitcoin has retreated 4% back to $10,400 which is pretty much what it started out at on the 1st of February. Altcoins are pretty much all in the red, declining from the small gains they have made over the past couple of days. Only DigixDAO marches relentlessly upwards leaving all of its brethren behind.

DGD was the top performing cryptocurrency in February, doubling in price. According to Coinmarketcap it is also the top performing altcoin yet again today, up 15% over the past 24 hours. Trading now at around $570 from $485 this time yesterday DGD seems unstoppable. Over the past seven days it has jumped an impressive 87% while most other altcoins have declined slightly.

Being linked to the gold standard has obviously helped in these times of crypto uncertainty as it is the third time DigixDAO has been top coin in a month. At a devcon at the National University of Singapore earlier this week the team announced that;

“The Smart Contracts for our DGX product has been fully completed and we are tying up some loose ends on the physical operations part where bullion and banking are concerned. We still plan to launch our marketplace for DGX end Q1 2018.”

DigixDAO is very hot property at the moment, leaving all others in the dust as it makes daily gains of 15-20%. Binance has the lion’s share of the trade with almost 90%, and $141 million has been traded in the past 24 hours. There are 2 million DGD tokens circulating and it has just entered the top 25 with a market capacity of $1.1 billion.

Very few other altcoins are performing well during the Asian trading session this morning. A couple that are still green at the time of writing are Tron and Nano. Taking a hit of over 10% loss are Neo, Cardano, VeChain and Lisk.

More on Digix can be found here: https://digix.global/

FOMO Moments is a section that takes a daily look at the top 25 altcoins during the Asian trading session and analyses the best performing one, looking for trends and fundamentals.

Speaking at the Nordic Business Forum in Sweden, Apple co-founder Steve Wozniak admitted he has sold off almost all of his Bitcoin holdings — keeping some to “experiment” with. Despite this, he’s still a keen supporter, maintaining the that the cryptocurrency is superior to gold and fiat currencies.

Wozniak became interested in Bitcoin when it was priced at $70, but was originally put off by what he saw as a cumbersome process for getting and storing cryptocurrencies. Eventually, he bought into the coin when one was going for $700. Considering current price levels, it’s likely he made a nice profit on the sale. Though it’s impossible to assess exactly how much money he made on the investment, because he has not disclosed how much of the cryptocurrency he acquired.

“When it shot up high, I said, ‘I don’t want to become one of those people that watches it, watches it, and cares about the number,'” Wozniak said. “I don’t want that kind of care in my life. Part of my happiness is not to have worries, so I sold it all — just got rid of it — except just enough to still experiment with.”

Despite this choice to part with Bitcoin, Wozniak has been — and still is — a vocal supporter of cryptocurrencies and blockchain-based technologies. At the Money 20/20 last year, Wozniak said he thought Bitcoin was better than gold and fiat currencies like the U.S. dollar because it had a finite supply. According to him, gold’s finite supply could be increased if alternate methods of mining could be developed. Similarly, a government body could influence the flow of U.S. dollars.

“Gold gets mined and mined and mined,” he said. “Maybe there’s a finite amount of gold in the world, but Bitcoin is even more mathematical and regulated and nobody can change mathematics.” The coin’s supply is mathematically constrained to 21 million total, with about 80% of those currently in circulation.

Wozniak also assessed Bitcoin as a store of value, comparing it to owning a house. “Your house has value. And it is a house today, 40 years from now, it still is a house in value,” he said. As for the future, Wozniak expects Bitcoin to develop and become a more effective medium of transaction for day-to-day use: “It’s not that easy to do yet, but it’s getting there.”

The body responsible for providing the UK with all the physical money they have in circulation, the Royal Mint, have launched their own cryptocurrency. It’s called Royal Mint Gold (RMG) and the idea behind it is to provide a safe, secure, cheap, and convenient way for people to hold gold as an investment.

In an interview with the UK’s Express newspaper, Tom Coghill of the Royal Mint’s RMG sector stated:

“We already sell physical gold through our Royal Mint Bullion business and we sell coins and bars. In this sense what we’re doing here is simply making that a digital business and allowing for our clients to be able to hold gold for the first time on a blockchain basis. The difference between what we’re doing and what other crypto digital assets is that we’re a physical tangible asset. One gram on our blockchain represents one gram physically in our vault. So it’s real gold you’re holding when you’re holding our RMG.”

Essentially, what the Royal Mint are doing is storing gold for people and tracking who owns it using a blockchain. It’s really not all that revolutionary.

Coghill went on to trot out a tired argument that many gold bugs rely on when defending the value proposition of the planet’s most widely regarded precious metal. For him, the fact that people have been using gold to store value for over 6,000 years makes it a better investment than Bitcoin or other cryptocurrencies. However, what seems strange is that RMG provides a way for folk to “own” gold but the Royal Mint remain the custodian of the bullion. Many who want to invest in gold do so because they fear a massive breakdown in society would render money useless and in which case, gold would be a suitable tool for barter in the place of cash. In such a scenario, is the Royal Mint really going to dishing physical metal out in exchange for RMG tokens? It seems doubtful…

The UK isn’t alone in their creation of a gold-backed cryptocurrency. In Australia, the Perth Mint claims to be doing something similar. Richard Hayes, the Chief Executive there told the Express:

“I think as the world moves through times of increasing uncertainty, you’re seeing people look for alternate offerings… And you’re seeing this massive flow of funds into the likes of Bitcoin at the moment because people are looking for something outside of the traditional investments.”


On CNBC’s Rundown, respected researcher, and financial analyst Ronnie Moas from Standpoint Research stated that in the long-term, the bitcoin price will likely reach $400,000.

“Bitcoin is already up 500 percent since I recommended it in the beginning of July, and I’m looking for another 500 percent move from here. The end-game on bitcoin is that it will hit $300,000 to $400,000 in my opinion, and it will be the most valuable currency in the world,” said Moas.

In July, Moas predicted the price of bitcoin to surpass the $5,000 mark by the end of 2017, when bitcoin was trading at below $2,600. As of December 18, the price of bitcoin remains above $19,000 and its market cap has surpassed $317 billion.

$400,000 Long-Term Target

Essentially, a $400,000 long-term price target of bitcoin would require the market valuation of the cryptocurrency to achieve exactly $8.4 trillion, a market cap that is larger than that of gold.

In 2013, Thompson Reuters GFMS revealed in a report that there exists 171,300 tons of gold in supply. That estimate placed the valuation of the gold market at $7 trillion. For the price of bitcoin to surpass $400,000, its market cap will have to surpass that of the gold market.

Previously, NewsBTC reported that JPMorgan global markets strategist Nikolaos Panigirtzoglou explained the potential of bitcoin penetrating into the gold market and establishing itself as the premier store of value through a drastic increase in liquidity and adoption.

Panigirtzoglou stated that the launch of bitcoin futures contracts and integration of the cryptocurrency by major financial institutions would allow bitcoin to compete against traditional asset classes such as gold. He stated:

“In all, the prospective introduction of bitcoin futures has the potential to elevate cryptocurrencies to an emerging asset class. The value of this new asset class is a function of the breadth of its acceptance as a store of wealth and as a means of payment and simply judging by other stores of wealth such as gold, cryptocurrencies have the potential to grow further from here.”

Bitcoin Already Penetrating Into Offshore Banking Market

As many analysts including Blocktower co-founder Ari Paul noted, bitcoin is already penetrating into the offshore banking market at a rapid pace, an industry which major banks such as JPMorgan and Goldman Sachs dominate.

The offshore banking market is estimated to be worth over $40 trillion, with the majority of holdings and wealth of large-scale investors and traders stored overseas. Paul emphasized that as a robust and decentralized store of value, Bitcoin is capable of serving the offshore banking market in orders of magnitude better than centralized financial institutions, as it provides financial freedom, privacy, and independence.

Over the next few years, if bitcoin can sustain its current growth rate as a store of value and a currency, the market cap of the cryptocurrency will likely enter the trillion dollar region.

In April, ShapeShift CEO Erik Voorhees, who has always been extremely optimistic in regards to the mid to long-term growth trend of the cryptocurrency market, explained that he would be satisfied if the cryptocurrency market cap surpasses $300 billion by 2021.

The bitcoin market cap has surpassed the $300 billion cryptocurrency market cap prediction by Voorhees, and the market valuation of all of the cryptocurrencies in the market combined has surpassed $587 billion.

According to ACG Analytics US macro strategy head Larry McDonald, investors have begun to sell gold to invest in bitcoin through the newly launched bitcoin futures exchange of the Chicago Board Options Exchange (CBOE).

Bitcoin is Penetrating into the Gold Market

Since September, the value of gold miners ETF (GDX), the largest gold exchange-traded fund (ETF) in the market, has fallen by nearly 15 percent. In the past, McDonald noted that the value of gold ETFs were correlated to the price trend of bond yields. But, this week, McDonald explained that the decline in the price of gold ETFs was triggered by the rapid increase in demand for bitcoin.

On CNBC’s Power Lunch, McDonald explained, “Over the last two years, every time rates have come down, and this week rates have moved lower, you had gold go up. Almost every time, there has been an 82 percent correlation between gold and bonds. This week, for the first time, that correlation broke down, and I do think it has something to do with bitcoin.”

Earlier this month, JPMorgan global markets strategist Nikolaos Panigirtzoglou stated that the listing of bitcoin futures by CBOE and CME, two of the world’s largest options exchanges in the global finance market, will provide the cryptocurrency with sufficient liquidity and robust infrastructure to become a major asset class.

Given bitcoin’s decentralized nature, transportability, fixed supply, and divisibility, Panigirtzoglou emphasized that in the long-term, bitcoin will be able to compete with traditional stores of value such as gold.

McDonald offered a similar viewpoint as Panigirtzoglou, as he stated that bitcoin and cryptocurrencies in the market are already eating into the multi trillion dollar gold market. He said:

“If you add up all the cryptocurrencies and the liquid gold that’s in the market right now, the cryptocurrencies in market cap are now 23 percent of the liquid tradeable gold. That’s up from 2 or 3 percent a year ago, so cryptocurrencies are definitely eating into the gold play.” 

Currently, the price of bitcoin is $16,600, with a market cap of over $279 billion. The market valuation of bitcoin accounts for less than 5 percent of that of the global gold market. But, according to McDonald, bitcoin will likely sustain its exponential growth rate in the long-term, while gold continues to decline in value against bitcoin.

Long-Term Price Trend

At the current phase, in which institutional investors and large-scale hedge funds are rushing to invest in bitcoin even with high premiums, it is highly unlikely that the price of bitcoin will be negatively impacted by bitcoin futures. In fact, over the past 24 hours, the price of bitcoin increased by more than 20 percent, after the launch of CBOE’s bitcoin futures exchange.

As analysts including BitMEX business development head Grey Dwyer noted, the market cap of bitcoin could reach a trillion dollars by the end of 2018, as tens of billions of dollars in institutional money flow into the bitcoin market in the upcoming months.

In a surprising development for the international holding company, JP Morgan have announced that Bitcoin could be on the verge of turning into a more traditional asset class. Analyst Nikolaos Panigirtzoglou at the financial powerhouse told the Telegraph that the CBOE Global Markets and CME Group proposals to offer Bitcoin futures

 … has the potential to elevate cryptocurrencies to an emerging asset class.

To those who’ve been following the stance of the JP Morgan executive towards Bitcoin, the sentiment may come as a surprise. Earlier this year, the CEO of the international financial institution, Jamie Dimon, lambasted Bitcoin and cryptocurrencies with allegations that they were a “fraud” and they were destined to end up like the famous tulip bubble in 17th Century Holland in which many traders were burned. He even went as far as to say that any of his employees trading Bitcoin would be fired.

Thanks to recent positive developments, Mr Panigirtzoglou thinks the Bitcoin market might be maturing:

“The prospective launch of bitcoin futures contracts by established exchanges in particular has the potential to add legitimacy and thus increase the appeal of the cryptocurrency market to both retail and institutional investors.”

The analyst at JP Morgan likened Bitcoin to other stores of wealth such as gold. He went on to suggest that based on gold’s history, the world’s most famous cryptocurrency could see further growth.

Thanks to gold’s much greater market capitalisation and trading volume, Panigirtzoglou thinks there is plenty of room for Bitcoin to grow. He cited the total crypto market cap of $300 billion and compared this with the $1.5 trillion in gold outside of central banks control.

He did warn, however, that the rise was not guaranteed. When considering factors that could influence the price negatively, he cited other cryptocurrencies that might be more compliant with regulatory requirements:

“Any given cryptocurrency does face competition from other cryptocurrencies and this poses a risk to their individual valuation… The valuation of bitcoin for example is affected by other digital currencies that compete for acceptance, often claiming to offer better technical, security or transactional characteristics. Some of them could even gain advantage in the future by offering better compliance with regulatory requirements.”



Peter Thiel, a prominent venture capitalist and investor with a net worth of $2.6 billion, believes the “great potential” of bitcoin is being “underestimated.”

Thiel: Bitcoin is Better Than Gold

At the Future Investment Initiative in Riyadh, Saudi Arabia, Thiel compared bitcoin to gold, describing it as a robust store of value that could replace traditional assets, currencies, and stores of value in the long-term. Thiel stated:

“I’m skeptical of most of them (cryptocurrencies), I do think people are a little bit … underestimating bitcoin especially because … it’s like a reserve form of money, it’s like gold, and it’s just a store of value. You don’t need to use it to make payments. If bitcoin ends up being the cyber equivalent of gold it has a great potential left.”

Thiel further compared the mining process of gold to bitcoin, explaining that it is a lot harder to produce bitcoin because of its mathematical system and proof-of-work (PoW) consensus protocol.

“Bitcoin is mineable like gold, it’s hard to mine, it’s actually harder to mine than gold. And so in that sense it’s more constrained,” said Thiel.

Earlier this month, ING, one of the largest financial conglomerates in the Netherlands, revealed that the electricity required to verify a single bitcoin trade could power a house in the Netherlands for one whole month.

ING senior economist Teunis Brosens wrote:

“By making sure that verifying transactions is a costly business, the integrity of the network can be preserved as long as benevolent nodes control a majority of computing power. Together, they will dominate the verification (mining) process. To make the verification (mining) costly, the verification algorithm requires a lot of processing power and thus electricity. Bitcoin’s energy costs stand in stark contrast to payment systems that have the luxury of working with trusted counterparties. E.g. Visa takes about 0.01kWh (10Wh) per transaction which is 20000 times less energy,”

Bitcoin’s Mining Process and Mathematical System

Because bitcoin is that much expensive and difficult to mine, a fair and transparent financial network can be sustained wherein the monetary supply of the cryptocurrency is fixed. Steve Wozniak, the co-founder of Apple, the largest technology company in the world, explained that bitcoin is more legitimate than most systems due to its transparent structure and decentralized nature.

“There is a certain finite amount of bitcoin that can ever exist. Gold gets mined and mined and mined. Maybe there’s a finite amount of gold in the world, but Bitcoin is even more mathematical and regulated and nobody can change mathematics,” said Wozniak.

Some of the highly regarded experts, analysts, investors, and entrepreneurs such as Peter Thiel, Steve Wozniak, and Tom Lee consider bitcoin as a more efficient, robust, and fair store of value than bitcoin. In the long-term, if general consumers eventually begin to consider bitcoin as the premier store of value and safe haven asset, the value of bitcoin will rise at an exponential rate.

In a recent address, Goldman Sachs has advised clients to beware of cryptocurrency. Instead, the investment banking juggernaut favours precious metals as part of a balanced portfolio:

The use of precious metals is not a historical accident – they are still the best long-term store of value out of the known elements.

The note issued to investors this week detailed the differences between the two assets from a value perspective, concluding that gold remained the favourite. In their view, gold continues to satisfy the main characteristics of money better than Bitcoin and other cryptocurrencies. They highlight security, regulatory, and infrastructure risks, as well as the high fees associated with pre-SegWit transactions.

Using these metrics, it’s hard to see how Goldman Sachs favoured gold above crypto. Whilst it may enjoy historical precedence as a store of value, gold suffers from its own flaws making its worth just as arbitrary as Bitcoin. Both are currently backed by faith, rather than utility. Gold has had thousands of years to prove its use and, aside from a few small industrial applications, has failed to do so. Bitcoin, on the other hand, is just getting started.

The investment banking memo highlighted the risk of compromise digital wallets pose via attacks from hackers. However, if properly secured, the chances of this are immeasurably small. Most likely smaller than the chances of having a gold vault smashed into and the contents looted.

Goldman Sachs went on to highlight the steep transaction fees affecting the Bitcoin network pre-SegWit. Whilst true that earlier this summer, the price of transferring Bitcoin increased to such an extend that it was no longer usable for micro-payments, scaling technology aims to ensure that this is no longer the case. Users who’ve made a SegWit transaction already will vouch for the developers’ success in this regard. Now, compare that with gold. How much does it cost to send 10, 50, or even $100 million in gold around the world? We’ll wait…

The banking behemoth went on to claim that gold has no obvious competitors in the space. They highlight the number of cryptocurrencies currently in existence to support their case for its dominance over Bitcoin. We’re not sure what planet they’re living on when they make such arguments. Last time we checked there were many, many different metallic elements. All have value. Most even have more solid use cases. Copper might not be worth as much as gold but then again, Monero isn’t worth as much as Bitcoin. We’re at a very early stage in cryptocurrency and it’s only natural that the space would be crowded at this juncture. As the market matures, we’ll likely see a huge thinning of the number of digital assets available with only those with practical uses surviving.

Regulatory risk was another factor that the note observed. However, numerous country’s legislative have attacked Bitcoin in recent weeks, and the price showed naught but a small hiccup. The Chinese shutting down exchanges and banning initial coin offerings in September immediately caused fear in the market but investors quickly remembered that one of the central premises of Bitcoin is its government resistance.

Finally, the Goldman Sachs memo claimed that gold has much lower volatility than cryptocurrency. Whilst this is certainly true at present, basic economics suggests that if Bitcoin were to replace gold as the planet’s store of value, it would share exactly the same if not less price movement than any other commodity, share, or asset. The current extreme shifts in value are the result of Bitcoin’s relatively low market cap in comparison to the currency of countries and especially the entire worth of the whole planet’s gold market. If interest around the globe continues to grow there is no reason not to refute the central tenant of the Goldman letter from earlier this week:

Cryptocurrencies are not the ‘new gold’ despite their recent popularity.

Image: Shutterstock

Tom Lee, a highly regarded Wall Street analyst and the co-founder of Fundstrat, believes the Bitcoin price would achieve $25,000 in the next five years, by 2022.

Short-Term Price Trend of Bitcoin: At Least $6,000 by Mid-2018

In the short-term, by mid-2018, Lee explained that the price of Bitcoin would surpass the $6,000, based on the Metcalfe’s law.

“If you build a very simple model valuing Bitcoin as the square function of users times the average transaction value, 94 percent of the Bitcoin moved over the past four years is explained by that explanation,” said Lee.

The model used by Lee and Fundstrat to predict the short-term price trend of Bitcoin strictly revolves around its network effect. For many years, apart from Ethereum, not a single cryptocurrency in the market has come close to surpassing the market cap of Bitcoin. Investors such as Alistair Milne attributed such strong long-term rally and growth rate of Bitcoin to its network effect. As Milne noted:

“Bitcoin is the reserve currency of the ‘crypto’ world. In the past 24 hours over half a billion USD of (non-fiat) tokens were traded vs BTC. Bitcoin’s market is deeper than any other by a country mile. No new token can compete with that.”

Historically, the network effect of Bitcoin has been crucial to the mid and long-term growth trend of Bitcoin, as seen in the recent case of Bitcoin Cash. Upon its launch in September, some of the largest mining pools and mining equipment manufacturers in the global mining industry such as ViaBTC and Bitmain’s Antpool have migrated to Bitcoin Cash during a brief period of time wherein it became more profitable than the original Bitcoin to mine. But, as users and investors remained on the original Bitcoin blockchain, miners inevitably switched back to Bitcoin, reallocating their hash power.

Long-Term Price Trend of Bitcoin: $25,000 by 2022

Lee emphasized in an interview with Business Insider that the increasing mainstream awareness of Bitcoin as the new gold or “digital gold” will push the value and the market cap of Bitcoin upwards. He stated that if Bitcoin could secure as little as 5 percent of Gold’s market, the Bitcoin price could very likely reach $25,000 in the next five years.

“Bitcoin represents a store of value because it is an encrypted database, that for seven years has not been hacked. That is a way to store value. And if personal information is our gold, Bitcoin is our digital gold. So we think that the gold market which is $9 trillion, and for a generation of investors gold was their store of value. I think the next generation of young people view Bitcoin as their store of value. And if it captures 5 percent of the gold market, it is worth at least $25,000 per unit.”

Already, institutional investors, retail traders, and general consumers in major Bitcoin markets such as Japan, the US and South Korea have started to demonstrate increase in demand for the cryptocurrency. If the demand for Bitcoin as a store of value and a safe haven asset further rises, the $25,000 long-term target of analysts such as Lee would become more realistic.