Recently, the Coinbase cryptocurrency exchange (USA) announced the sale of bonds worth $1.5 billion, later changing the amount by $2 billion. One of the leaders of the crypto industry borrows money at the expense of bitcoins. Cryptocurrency market participants say this event proves the legitimacy of the digital currency. Although earlier some experts reported that bitcoin cannot act as a means of payment on loans.
Buying bitcoin on credit is unprofitable, because it can grow in price many times compared to the purchase price. Borrowing is best for US dollars. The exchange rate of the American currency has recently been declining, and it is not characterized by such volatility as bitcoin. The value of cryptocurrency is changing very quickly. Sharp rate hikes attract the attention of investors who have cash and want to make big profits in the short term. However, there are no rational grounds in favor of credit in bitcoins. The borrower needs stability, not risks of credit growth. Bitcoin is extremely inconvenient for lending.
Bitcoin cannot be considered digital gold
Cryptocurrency is often called this. However, there is a significant difference between precious metal and cryptocurrency. Gold can be used as capital to create or expand a business. Precious metal can act as a means of payment for enterprises in the real sector of the economy when buying fixed and revolving funds or when paying for utilities. Bitcoin cannot be a tool for investing in manufacturing industries. Cryptocurrency is a risky financial instrument in terms of capital savings. For example, the bitcoin rate fell sharply after the Chinese authorities banned the activities of foreign cryptobirds in the country. The Central Bank of the Middle Kingdom banned citizens from using services related to crypto assets.
Meanwhile, the gold management company Monetary Metals (USA) recently announced the purchase and repayment of interest on the first gold bond since Franklin Delano Roosevelt, the 32nd American president of the United States, abolished this type of asset in 1933. Monetary Metals plans to issue and sell a fairly large number of gold bonds, which is stimulated by the demand for this type of asset. Since 2016, the company offers investors to profit when renting yellow metal. On the organization's website, you can see an example of the certificate that investors receive in return for their investments. Certificates are printed by Valaurum Inc on a special foil of 24-carat gold, protected by several layers of durable polymer. This technology is used to create flexible and easy-to-store physical gold. The company leases precious metal, and investors receive 2.25% per annum of the volume of leased gold.
Is bitcoin better than gold?
Quotes of the digital currency are extremely volatile. This brings huge profits to bitcoins sellers. Each next buyer hopes that bitcoins will bring him in the future revenue an order of magnitude more than the previous seller.
Marion Labour, an analyst at the largest financial conglomerate Deutsche Bank (Germany), noted the similarity of cryptocurrency with yellow metal in the context of volatility. Gold is considered a stable asset for capital preservation. However, its rate, like the price of bitcoin, may have fluctuations. For example, in 2000-2011. the growth of precious metal quotes amounted to 600%. Bitcoin's volatility is an order of magnitude higher, making it reliable as inflation insurance. According to the expert, there are 3 reasons for the volatility of bitcoin, which are not inherent in precious metal. Firstly, cryptocurrency is a speculative asset. Secondly, cryptocurrency can participate in trading operations only in the virtual world and on one platform. This makes the bitcoin rate dependent on large purchases. Thirdly, investors are constantly changing their attitude to the digital currency. It should be remembered that bitcoin was created in 2009, while the history of gold dates back millennia. Therefore, gold, not bitcoin, is the basis for the future currency system.
The value of gold increases slightly amid the cheaper dollar and rising inflation. Problems in China's construction sector and the flaring energy crisis are now having a positive impact on yellow metal quotes. These factors force investors to pay renewed attention to gold, which is a protective asset that can stabilize the investment portfolio. However, some experts positively assess the prospects for the gold market, although they note that it is still too early to talk about an upward trend. According to Bloomberg, the price of gold this year fell by 6.1% compared to 2020. However, the availability of physical precious metal decreases, which can create its shortage in the market.