🔥The commonly made claims that Bitcoin is new gold, digital gold or gold 2.0 suggest that Bitcoin and gold are similar. More specifically, if investors treat them as similar, their prices should co-move resulting in high return correlations. However, time-varying, frequency-dependent and quantile-dependent correlation estimates show near-zero correlations on average and also over shorter sub-sample periods. We offer an explanation for this apparent inconsistency. 😱🔥
*Similarities bv Gold and $BTC *🔥🔥
While there are clear similarities between Bitcoin and gold, e.g. the decentralized and distributed mining and ownership and the fact that the supply cannot be arbitrarily inflated, there are also many differences such as the age and maturity of gold versus Bitcoin and the fact that gold is a physical asset and Bitcoin is not. Another key difference is the fact that gold cannot be replicated while all the features of Bitcoin can be replicated by issuing a similar coin with a similar or different name. For example, Litecoin is described as “silver to bitcoin’s gold” due to its similarity with Bitcoin.
*Difference between Gold and $BTC *😱🔥
Despite these differences, the similarities may be reflected in a common factor that drives both gold and Bitcoin resulting in some common movement (or co-movement) similar to the co-movement of gold and silver and the co-movement of Bitcoin and Ethereum. While gold and silver are different in many respects the return co-movement is close to one despite the different historical average returns and volatility. The same is true for Bitcoin and $ETH .💥🧬
