Bitcoin Gold, Forex

Difference Between Bitcoin, FOREX & Gold

As Bitcoin and other decentralized global cryptocurrencies enter the mainstream many investors are seeking information to exploit the markets. Bitcoin, like forex and gold, is required by law to recognise, tax, and enforce regulation. Here we look at the differences between Bitcoin, Forex and gold.

Bitcoin versus forex

Forex, the Foreign Exchange market, is the world’s centre for exchanging currencies with traders measuring and exploiting the volatility in exchange rates between currencies to make a profit. The more a currency varies, the higher the risk, but also the profit. Bitcoin trading follows the same forex principles since traders are essentially exchanging a virtual cryptocurrency for another currency.

As the demand for Bitcoin or forex increases, the underlying price rises, and when the demand decreases the price declines. Unlike forex, Bitcoin has a limited supply in circulation with new Bitcoins being created at a predictable and decreasing rate.

The main difference between bitcoin and forex is liquidity. Forex is an estimated 5 trillion market, while bitcoin is a relatively new and smaller market valued at 3 billion. Bitcoin value is based off the macroeconomics of the underlying cryptocurrency system while forex pairs work off the economic fundamentals of individual countries traded. Bitcoins relatively small market makes the trading atmosphere more volatile than forex.

Another difference is that bitcoin can be traded 24/7 while forex is traded 24/5 in line with traditional financial institution schedules.

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Bitcoin versus gold

Bitcoin like gold is viewed by some as a viable long-term storage of wealth. Bitcoin has a cap in place that will only allow 21 million coins ever to be mined giving it a controlled supply and rarity unlike the continual printing of a nations currency. To date, 15 million coins have been mined and the value has risen from sub USD100 in 2012 to USD1235 in 2017. Like gold, as the supply becomes limited the demand has increased value over time. Analyst’s believe the true value of Bitcoin will be recognised when the very last coin is rewarded, giving a value close to USD100,000, with some predicting USD 1 million.

The underlying success of any cryptocurrency is determined by geographical and mainstream adoption combined with consumer confidence, merchant acceptance and real-world use, creating a viable payment platform and true storage of wealth with trading market capabilities provided by a thriving and innovative decentralised economy.

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Bitcoin is a virtual floating exchange rate with no underlying physical asset on which to base its price. In contrast, gold is a tangible currency backed by a physical commodity. Both price valuations are dictated by investor confidence and overall market sentiment. While some believe Bitcoins offer the ability for a better currency, others prefer to rely on the stability of gold’s historical track record to provide safety, security and stability against inflation and a struggling economy.

Bitcoins are still in their infancy and it will take many more years before investors will see a reliable track record. Meanwhile gold has been accepted the world over for thousands of years, representing ‘money’ due to its durability, rarity and ease of divisibility. Gold is finite, is difficult to locate, mine and refine, making it a rare commodity and therefore of value. Bitcoin has a controlled and increasingly limited supply with digital ‘mining’ capabilities.

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