The old and the new guards of barbarians are both basking in their glorious moment. The former, somewhat more cautious and wary, are flocking to gold. The price of this ancient metal has crossed the historic threshold of $2,140 (approximately €1,969) an ounce. The latter guard, more modern and daring, has propelled the digital currency bitcoin to unprecedented heights. Each token is worth over $69,000, three times more than a year ago. In the case of gold, it’s called precaution, whereas in the case of bitcoin, it’s speculation. Both betray defiance and uncertainty in the face of rising ill winds.
The spectacular rise of bitcoin, which comes after the bankruptcy in November 2022 of one of its main players, FTX, whose founder, Sam Bankman-Fried, is currently in prison, is attributed to two classic phenomena that fuel speculation: increased demand and reduced supply. On the demand side, the authorization in January of easily accessible investment products mimicking bitcoin’s performance triggered a surge in purchases. BlackRock, the world’s largest asset management fund, has already amassed $10 billion for its bitcoin-specialized exchange-traded fund (ETF).
On the supply side, specialists highlight the arrival in April of a phenomenon ingrained in the very code of this digital currency: the halving of remuneration, in bitcoins, for entrepreneurs known as miners, akin to mining for gold, who conduct computational calculations to create new tokens. Consequently, the cost of creation will double, leading to the exit of less productive players from the market and thus tightening the supply. This was sufficient to prompt both professionals and individuals to return in hopes of quick gains that are no longer feasible in the stock market today.
Speculative and volatile
As for gold, investors are anticipating more complicated times ahead. First, bond yields are set to fall with the next cut in US interest rates. Analysts are predicting this for June, given the marked slowdown in the US economy. What is more, many emerging countries, led by China, have lost confidence in dollar investments following the US seizure of Russian assets. On top of all this, savers in China are fleeing the stock market and other real estate disasters.
But whether we’re talking about bitcoin or gold, these two limited-quantity assets are far removed from real economic life. Their speculative and volatile nature further distances them from their claim to be true currencies, which serve above all to compare, exchange, and save. This is why the economist John Maynard Keynes once described gold as a “barbaric relic.” It is a vestige of ancient times, faced with the vertigo of new times.