Bitcoin has long been hailed as a replacement for gold. In November Michael Saylor, the chief executive of an investment firm that holds bitcoin reserves worth $3.9 billion, boldly predicted that what he called “digital gold” was “going to replace gold this decade”.
With inflation on track to hit 10 per cent this year, few investment products are capable of protecting cash from being eroded in real terms. Gold, long considered a hedge against inflation, underperformed during the pandemic compared with cryptocurrencies. After reaching a record price of nearly $2,075 an ounce in August 2020 it has since fallen, then plateaued at about $1,800.
Millions of investors in search of higher returns have turned to cryptocurrencies, which are managed using a digital record known as