Elon Musk cancels Bitcoin! Is it gold’s gain?

The price of Bitcoin is falling, but the price of gold is rising. This latest move shows the differences and similarities of the two assets

| More on:
ASX gold shares crypto Illustration of gold bullion and bitcoin layered in front of a share price chart

Image source: Getty Images

The cryptocurrency Bitcoin (CRYPTO: BTC) has had an interesting week, to say the least. After 3 months of trading sideways at around US$55,000 a coin (with some of that trademark volatility in between of course), the Bitcoin price plummeted this week. On Thursday morning, the cryptocurrency fell as hard as 15% to as low as US$46,600 in just the course of a few hours. The price has recovered somewhat since but is still out of that range that it occupied for so long.

The catalyst for this drop? Elon Musk, of course. The Tesla Inc (NASDAQ: TSLA) boss came out and said that Tesla wouldn’t be buying any more Bitcoin. It will no longer accept it as a form of payment from buyers of its products either. Musk cited the massive energy required for mining Bitcoin, especially that generated from fossil fuels, as the reason behind this surprising move. Musk had previously been an advocate for Bitcoin. At least before he discovered Dogecoin (CRYPTO: DOGE) in his social media outings. Tesla still owns more than US$1 billion worth of the currency, which Musk has committed not to sell.

This latest chapter in the Bitcoin story is a timely reminder of the cryptocurrency’s utility. Or in this case, lack of it. And it also highlights the difference between Bitcoin and gold, which are often compared against one another.

Gold vs Bitcoin

Bitcoin is often called ‘digital gold’, the millennial’s answer to the traditional gold bug. It’s described as such because the cryptocurrency shares many of the attributes of gold, and thus attracts a similar class of investors. It’s scarce for once. With a finite supply of 21 million coins, Bitcoin is often touted as ‘inflation-proof’. The same logic is sometimes used for gold. the yellow metal has often (although not always) been a historically effective asset in inflationary periods as well. And since gold is globally priced and valued in a similar manner around the world, it has some of the same cross-border, globalist appeals that Bitcoin does as well.

During the heydays of bitcoin’s climb, many investors were predicting that Bitcoin would even replace gold for that traditional ‘hedge’ role it plays in some investors; portfolios.

But this week has thrown some of the weaknesses of this argument into the light. For one, can you imagine a scenario where one man could release a statement of ethical opinion about gold that could cause it to lose 15% in a matter of a few hours? I doubt it.

The gold price is no stranger to volatility either, although not nearly as much as Bitcoin. But over the past 2 months or so, gold has climbed a respectable 6% or so. Bitcoin has fallen close to 5% over the same period. These two assets may be rivals in many ways. But over recent months, gold seems to be giving its investors more joy than Bitcoin’s fans.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

Sebastian Bowen owns shares of Bitcoin and Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Bitcoin and Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Cryptocurrencies


Crypto venture firm’s lessons after $10 million haircut on LUNA losses

What can investors learn from the collapse of LUNA? Here's one research team's take...

Read more »

Clock with post it as a reminder of Tax Time

Own crypto or NFTs? Here’s why the ATO could have you in their sights come tax time

More than a million Aussies are estimated to have transacted in digital currencies and NFTs this year.

Read more »

woman examining ethereum price

Why is the Ethereum price down 48% this year?

Higher interest rates increase the appeal of safer investment assets like bonds and cash deposits.

Read more »

a man sitting at a computer at a desk has a look of anguish and trepidation on his face as he opens his eyes wide and made an aargh type expression with his mouth as his hair stands on end and his tie also stands on end with one part over each shoulder in what is supposed to be a humorous picture of something in a panic.

Un-stable coin? Terra crypto woes continue with another 31% fall

I'd think very carefully before going bargain hunting among stumbling altcoins.

Read more »

Concept image of Bitcoin and hand using laptop.

Using Bitcoin to diversify your portfolio? Read this

Cryptos have been rising and falling largely in line with other risk assets.

Read more »

Smiling ASX investor holding a gold bitcoin.

Good riddance to meme speculators ditching Bitcoin: expert

The exit of 'get rich quick' investors from crypto is a boon for serious long-term holders, says DeVere Group boss…

Read more »

a man weraing a suit sits nervously at his laptop computer biting into his clenched hand with nerves, and perhaps fear.

Can regulators prevent another US$45 billion crypto stablecoin meltdown?

Terra's LUNA token, meant to help its UST token remain pegged to the US dollar, has lost 99.99% of its…

Read more »

A man looks down with fright as he falls towards the ground.

Is the Bitcoin price heading all the way back down to US$20,000?

Last week's meltdown of UST and its backing crypto LUNA sent most every crypto tumbling lower.

Read more »