Reuters last week reported about the discovery of a large gold ore deposit in Uganda. Let's look at how much this news can affect the price of bitcoin.
Everyone knows that in difficult times, people invest in gold to save their savings. Usually, during crises, the price of gold rises and it is a good tool for saving assets.
And now a message has been received about the discovery of a large gold deposit. This may drop the asset price even more.
How will such a drop affect the price of bitcoin?
After all, bitcoin is called digital gold. If Uganda has discovered 31 million metric tons of gold ore, as the government has stated, can it significantly increase the world's gold reserves? and reduce the price of gold, making it a less reliable “means of saving" in general?
The loss of the value of gold can become a profit for the cryptocurrency, because bitcoin is the only thing that has a limited supply and the issue of which is limited to 21 million BTC.
320,158 metric tons refined gold, which, according to a representative of the Ugandan Ministry of Mining, can be obtained from new deposits in the northeastern part of the country, far exceeding the 200,000 metric tons existing worldwide today.
At the same time, it is likely that new giant gold deposits will soon be discovered. At the same time, the issue of bitcoin is limited, which makes it even more attractive for investing and saving money than gold.
The increasing adoption of bitcoin around the world and the arrival of institutional investors on the market leads to the fact that bitcoin is increasingly being compared with the shares of IT enterprises, because first of all bitcoin is a technology.
Bitcoin vs Gold
Bitcoin has been operating for just over 10 years, and its market penetration is less than 1% worldwide. Although many believe that the global adoption of bitcoin is much higher, the penetration of bitcoin must reach higher values for its widespread use.
According to the World Gold Council, a high-quality underground gold mine yields from 8 to 10 grams of refined gold per metric ton of gold ore.A low-quality mine yields from 4 to 6 grams per metric ton.
Based on an average of 7 grams of refined gold per metric ton of gold ore, Uganda's mines will produce about 217 metric tons of refined gold. Adding 217 metric tons would increase the world's reserves of “aboveground" refined gold by only about one tenth of a percent.
Bitcoin has one big advantage over gold mining. Its issue is more predictable and algorithmically calculated.
And, although relatively few people today consider Bitcoin as a means of saving, it can't stay that way for too long.
During the explosion of the dot-com bubble, Amazon lost 90% of its value because most investors did not realize how widespread e-commerce would become.
Blockchain technology may also be underestimated today, because economist Paul Krugman in 1998 also believed that the Internet would be less relevant than a fax machine.