Bitcoin's value preservation function is incomparable to gold

  Bitcoin’s recent performance has been very eye-catching, so the similarities between Bitcoin and gold have once again become the focus.

     So far this year, the price of Bitcoin has risen by 18%, making it one of the best performing currencies in 2015. Since its low of $ 380 in January , it has rebounded by 108%, especially last month, when Bitcoin's monthly increase reached 39%.

(Gold price and Bitcoin price comparison)

     In contrast, gold has performed poorly, having fallen by more than 8% so far this year, especially in the recent 10 trading days, with 9 of them falling.

    Frans Lategan, a consultant at SensePost, said: "Since bitcoin can be transferred around the world in minutes and at virtually no cost, there are enough people to ensure that there is no arbitrage and that the price of bitcoin is not too different from currencies and foreign exchange."

    Gold is a traditional safe-haven asset, and Bitcoin has also become a safe-haven option in recent years. During the Greek bond crisis, the demand for Bitcoin was greatly boosted by buyers in Greece.

    But Lategan said that due to the limited total amount of Bitcoin, it is not enough for everyone to use its hedging function. Only a small number of people, and the very wealthy class, will not use Bitcoin until the price rises significantly.

Julian Jessop, head of commodity research at Capital Economics, said Bitcoin is a very poor substitute for gold for all practical purposes.

    Jessop said that Bitcoin has no physical form, lacks depth and liquidity, and has no similar trading record as gold as a safe-haven asset. "Although some smaller investors will switch between gold and Bitcoin, Bitcoin has no credibility as a store of value or a diversified portfolio."

     Jessop also does not believe there is a correlation between gold prices and Bitcoin prices.

     Jessop believes that the decline in gold prices is due to the impact of the Federal Reserve's expectations of raising interest rates this year. "In contrast, the rise in Bitcoin prices is a bubble caused by speculation and has nothing to do with anything in the gold market."