The Struggle for Market Dominance
Bitcoin has taken a hefty hit this year, down 56% and yet it still clings to its spot as one of the top 20 global tradable assets. With a valuation of $400 billion, it even overshadows traditional giants like Exxon Mobil and Walmart. But can you really compare a digital currency with a behemoth of a commodity? It’s like comparing apples and oranges, or perhaps Bitcoin and… well, you get it.
Understanding Market Capitalization
When we talk market cap, we need to understand the math behind it. For instance, Exxon Mobil’s earnings landed it $25.79 billion over the last 12 months. Meanwhile, Boeing posted losses of $16.1 billion, yet its market cap hovers around $87.1 billion. Confused yet? Welcome to the world of investment valuation, where logic can take a backseat to speculation.
The Commodity Comparisons
Measuring Bitcoin’s worth against something stable like gold presents a challenge. Gold boasts an impressive $11.2 trillion market cap. If Bitcoin is the digital equivalent of gold, why are we placing it on a lower pedestal? Perhaps it’s because while gold is often used in industry, Bitcoin’s use case largely revolves around speculation and “HODL” memes.
Gold’s Performance Over Time
Is gold truly a good store of value? To answer that, we compare it with other trillion-dollar asset classes. Gold seemed to have a decent run, breaking the $2,000 mark in August 2020, but it watched stocks, housing, and energy sprint ahead leaving it in the dust, sort of like that kid who thinks he can join the school track team but only trains with a bag of chips in hand.
Bitcoin’s Volatility Explained
Bitcoin’s price swings can give anyone heart palpitations — think 20% moves in a week! However, there’s a trick to tackling that tremor-inducing volatility: the dollar cost averaging (DCA) strategy. By systematically investing a fixed amount (whether daily, weekly, or monthly), you can soften those price swings. It’s like having a rollercoaster at a theme park; best to hold on tight and enjoy the ride!
How DCA Works in Practice
If you followed a DCA strategy for the last five years, your average price cost for Bitcoin would be around $19,192. Even if it doesn’t quite match the gleam of gold, it shows promise as a long-term investment strategy.
ETF Showdown: Gold vs. Bitcoin
Now let’s briefly touch on exchange-traded products. The Bitcoin investment vehicles’ AUM, as of June, sat at a cool $15.9 billion. Not quite the mighty fortress that gold-covered investments have built, which towered at a staggering $221.7 billion. The bittersweet truth is, despite Bitcoin’s meteoric rise, gold still occupies a more ingrained position in the investment realm.
The Conclusion: Who’s Winning? Unclear!
Ultimately, the fight for supremacy between Bitcoin and gold continues, with each asset having a unique position in the investment landscape. Gold, a century-old classic, is still holding the torch for stable store-of-value, while Bitcoin’s volatility keeps newcomers guessing. So, while there’s no clear winner yet, one thing is certain: both Bitcoin and gold have yet to prove their mettle in this never-ending investment battleground.
