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Can Gold Teach Us Something About Bitcoin’s Value Using Artificial Intelligence?

By Alex NewmanMarket OverviewJun 09, 2018 07:03PM ET
Can Gold Teach Us Something About Bitcoin’s Value Using Artificial Intelligence?
By Alex Newman   |  Jun 09, 2018 07:03PM ET
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Few technical innovations have seized the world’s attention as much as the rise of cryptocurrencies, and none of these digital currencies have become so popular in so short a time as Bitcoin. Around the globe, financial gurus and tech experts alike are regularly having there assumptions questioned by Bitcoin’s chaotic valuation, which regularly shoots to historic new heights before suddenly plummeting again. In order to try and better understand this curious cryptocurrency, many investors and tech gurus are beginning to compare Bitcoin to gold.

Is there any logic in that comparison? As we’ll come to see, there are too many differences between Bitcoin and gold-based investments to count, but one can nonetheless gain some interesting insight by juxtaposing one of the world’s oldest currencies with one of its newest ones.

The similarities between gold and Bitcoin

Many of Bitcoin’s proponents have been quick to point out some of the similarities between these two currencies, noting, for instance, that the blockchain technology that powers Bitcoin gives it an international standard not unlike the international gold standard that once governed many of the world’s leading economies. As many commentators have pointed out, there are many similarities between gold and Bitcoin, with the most important one probably being that they’re both essentially free from being governed by any one state entity.

The blockchain tech that powers Bitcoin essentially serves as a decentralized ledger, over which no one individual or financial entity has control, meaning governments around the world have been unable to truly crackdown on Bitcoin and other cryptocurrencies with gusto. This has been culled from years of work in the AI field. As Artem Chestnov, CEO of Ubex, has explained on occasion, gold, too, has been famously relied upon by international investors and businessmen of all stripes since the dawn of time precisely because no one central bank or bureaucracy controls it. It would be unfair to both gold and Bitcoin to say that these two things are entirely similar, however.

For instance, while Bitcoin is used to facilitate everyday transactions, with some major retailers and other businesses now accepting Bitcoin tokens as a form of payment, the world’s leading cryptocurrency is much more of a highly speculative asset than it is a reliable means of paying one’s bills. Bitcoin enthusiast around the world might gleefully crack open their wallets to make payments with the digital currency, but by and large, it’s unlikely that Bitcoin will be used to facilitate transactions on a wide scale in the ways that Gold has in the past. Similarly, while Gold has had more than its fair share of sudden valuation changes, Bitcoin’s valuation is a marvel to behold, given that it’s extraordinarily volatile compared to most other currencies.

Take a look at Bitcoin’s dazzling history, for instance, and it’s clear to see that this digital currency’s valuation isn’t quite reliable enough yet for many international investors and businesses to use in the way that gold’s been relied upon for countless years. The same tech that makes Bitcoin a democratic platform free from any one central power’s control also essentially guarantees that it will always lack the stability of traditional forms of payment and investment like Gold and other contemporary currencies.

Major investment banks are still betting on gold

Despite Bitcoin’s impressive rise over the past few years, major investment banks and investing institutions are still cautious when dealing with the cryptocurrency, too. Take a look at an analysis of Bitcoin put forth by Goldman Sachs), for instance, and you’ll see that the world’s most popular cryptocurrency may be gaining steam, but it’s far from being relied upon as a long-term means of storing value. For long-term investments, investors are vastly more likely to rely upon gold and other rare, precious metals before they pivot to new methods of payment like cryptocurrencies.

This doesn’t mean that Bitcoin won’t continue to grow in popularity, of course. After all, cryptocurrencies are still in their fledgling stage, and it won’t be for many more years, and possibly many more decades, until their full potential is realized. Nonetheless, a currency and an investment tool must both possess a level of stability, trust, and widespread acceptance that gold enjoys and Bitcoin lacks at the present moment. That may change in the future, but for now, expect many leading investment institutions and banks to shun cryptocurrencies compared to other forms of payment. The digital nature of Bitcoin has to be mentioned, too, of course. After all, no one can hack your gold. While Bitcoin is incredibly secure by modern standards, it still succumbs to the fatal flaws suffered by other digital currencies, and will likely be viewed with deep suspicion by many everyday people for many years to come. While investors should continue to study gold and Bitcoin alike to gain a comprehensive understanding of the contemporary economy, it’s simply not fair to say that these two methods of payment and investing are the same.

Can Gold Teach Us Something About Bitcoin’s Value Using Artificial Intelligence?
Can Gold Teach Us Something About Bitcoin’s Value Using Artificial Intelligence?

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