Bitcoin Gold: an alternative to precious metal?

News Arnulf Hinkel, Financial journalist – 04.01.2018

After the introduction of Bitcoin Cash, Bitcoin Gold (BTG) is the second spin-off of what is probably the most widely known crypto currency, Bitcoin. It is a so-called hard fork from the original Bitcoin Blockchain.  Investment pioneers in the original Bitcoins, introduced in 2009, are looking at huge profits: while the digital currency initially fluctuated between US$0.008 and US$0.08 per unit, a Bitcoin is currently worth more than €12,000. However, since its introduction the price of the crypto currency has proven extremely volatile. Many financial market experts are thus speaking of an existing Bitcoin bubble ready to burst at any time. In late December 2017, Felix Hufeld, head of the German financial supervisory authority BaFin, issued a clear warning to investors not to invest in Bitcoins. Many central banks also rate the crypto currency as a pure instrument of speculation lacking any payment or value preservation function, since no physical collateral of any kind exists and its price is determined solely by demand. However, there also are more favourable views on Bitcoin. The Japanese GMO Internet Group, for example, will offer employees the option of receiving their wages partly in Bitcoins from February 2018, on a voluntary basis. The current high of the digital currency could be severely curbed by increasing regulation, as evidenced by the significant slump following South Korea's announcement to curb Bitcoin speculation.

Bitcoin Gold reached its high of €401 on 11 November 2017 shortly after its launch, but has lost around half of its value since then. Up to now, risk-seeking investors have tended to rely more on the parent currency Bitcoin, which is much more attractive to investors with an affinity to digital currencies than securities, FX or gold. In terms of safety, the latter in particular is the exact opposite of digital currencies. Just the same goes for gold-based ETCs backed with physical gold such as Xetra-Gold: compared to digital currencies, the risk of total loss is extremely low.

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