The recent surge in interest in Bitcoin from institutions and governments has been a hot topic in the financial world. Federal Reserve Chief Jamie Powell and other experts have pointed out that Bitcoin is not a direct competitor to the dollar, but rather to gold. The similarities between Bitcoin and gold, such as their scarcity, enduring nature, and mining difficulty, have been noted as key factors driving this comparison.
Countries in the BRICS alliance have also been making moves to introduce their own currencies as part of a larger de-dollarization effort. The decentralized finance sector, which is closely tied to Bitcoin, has played a role in shaping these decisions.
On the other hand, China has been hesitant to fully embrace cryptocurrencies, opting instead to regulate virtual tokens through the stablecoin bill in Hong Kong. China has a strong preference for gold as a reserve asset, with the People’s Bank of China (PBOC) being the world’s largest official buyer of gold in 2023.
In a recent update, the PBOC revealed that it had increased its gold reserves in November after a six-month pause in purchases due to record-high gold prices. By the end of November, China’s gold holdings had risen to 72.96 million fine troy ounces, up from 72.80 million the previous month.
Experts believe that the PBOC’s decision to resume gold purchases signals a willingness to continue building reserves despite the high prices. Gold prices had reached an all-time high in October due to increased demand as a safe haven asset amid geopolitical tensions and uncertainty surrounding the US presidential elections.
However, Chinese consumers have been scaling back their demand for gold as prices have surged by nearly 30% this year. While gold bars and coins have maintained their value, sales of luxury items like jewelry have declined as investors look to protect their wealth in the face of economic uncertainty.
Overall, the debate between Bitcoin and gold as alternative assets continues to gain momentum, with countries like China closely monitoring developments in the precious metals market. The unique qualities of both Bitcoin and gold make them attractive options for investors seeking to diversify their portfolios and hedge against market volatility.