Over the first six months of 2016, Bitcoin trading volumes in Brazil surpassed that of gold on the Brazilian Securities, Commodities, and Futures Exchange by around 7 percent.
While gold has a track record that shouldn’t be underestimated, it also can’t be ignored that Bitcoin exceeding that of gold is seen as an historic moment given the fact that it has only be trading for seven years.
Speaking to Cointelegraph, author of ‘Bitcoin – money in the digital age’ and founder of the blog “Money in the Digital Age” on Brazil’s largest financial news site, InfoMoney, Fernando Ulrich, said that this was a phenomenal moment for the digital currency given its young age. However, while gold was seen as the natural hedging instrument when financial markets become unstable and increasingly risky, more people are now turning their attention to alternative ways of saving money.
“After almost a decade of unconventional monetary policy, investors have started considering the alternatives for endless quantitative easing, negative interest rates, [and] currency devaluations. In this environment, and in comparison to the precious metal, Bitcoin appears more and more as an even stronger contender to serve as a hedge, a safe haven asset.”
Calculating the trade volumes at the beginning of 2016 until the end of June, the total value of gold for the beginning six months of the year amounted to around $44 million compared to Bitcoin’s $47 million in the same period.
It’s hard not to see that the digital currency is experiencing a strong growth in Brazil. This is evident when you look at reports from bitValor stating that during the month of June 2016, the total Bitcoin trade volume rose by more than 45 percent compared to the trade volumes in 2015. Additionally, during the first six months of 2016, the total value of Bitcoin trades has exceeded that of combined Bitcoin trade volumes from the past three years.
“The cryptocurrency is not just digital gold, it’s digital gold on steroids. Compared to the shiny and tangible asset, Bitcoin provides an enormous reduction in transaction costs. It’s incredibly easier and cheaper to hold, store, and transfer, and it can be sent to anyone anywhere in the world in any amount.”
Ulrich added that as time goes by, more investors will inevitably realize the obvious utility of such an asset. Once they grasp the advantages over gold, it will be difficult not to expect Bitcoin to keep rising and surpassing the old safe haven metal. While it may take some time for Bitcoin to reach new highs, around six to 12 months according to Ulrich, he expects that during this time, the blocksize limit will be resolved, which in turn will give reluctant investors another boost of confidence.
Brazilian Banks Test Out Blockchain
It’s not just Bitcoin that is increasing in interest, but also Bitcoin’s underlying blockchain technology as banks turn their attention to it in a bid to improve services. Brazil’s largest bank, Banco Bradesco, which is newest addition to New York’s R3 CEV’s blockchain consortium, is getting ready to undertake a trial run of a new blockchain-based digital wallet.
Developed by Brazilian startup eWally, it will be put to test by the end of 2016 in San Paolo, where its payment and transfer services will be looked at.
Ulrich, however, is not convinced on its use and says that the blockchain hype among banks has yet to produce concrete results. While reconciliation among banks can be streamlined or optimized with the use of such a distributed ledger technology, it remains to be seen how secure how such a system would be in reality. Ulrich is hopeful though.
“[The] Brazilian banking system is well-known for being one of the most advanced in terms of technology, therefore, I’m curious to see how beneficial DLTs can be to banks and its customers.”
Gold is Still Ahead, For Now
Of course, globally, gold is still considered a highly important asset when compared to Bitcoin as both battle it out to become the most sought-after financial instrument for investments. According to the London Bullion Markets Association, gold is still ahead with more than $20 billion worth of daily transfers while Bitcoin lags behind with an estimated $1.5 billion transaction volume within its seven years of existence.
Ulrich says that from a purely technological perspective, gold can’t be compared to Bitcoin.
“Next to the digital currency’s superior qualities, the precious metal can indeed be considered a barbarous relic. But, of course, gold has thousands years track record that should never be underestimated. As audacious as it may sound, gold has never had a strong competitor. Time will tell.”