Coutts research also shows that bitcoin has low liquidity compared to other currencies – the average daily trading volume for bitcoin is around $1.5bn, compared to about $40bn for Mexican peso or $30bn for Korean won. Moreover, its breadth is also narrow with about 2% of bitcoin wallets holding 95% of the bitcoins in existence – in the meantime 97% of users own less than a single bitcoin.
ADS Securties senior adviser Nizar Al Aridi also refutes the claim that crypto-currencies can act as a safe haven like gold. He notes that the latter has a much longer track record – it can trace its origins to the Egyptians – compared to the 10 or so years that bitcoin has been around. In addition, gold has several proven uses such as jewellery, but it is also found in microchips, medical, economic and financial applications.
Al Aridi believes that one of the biggest differentiators between the two is the way they are mined in that gold is a physical product while bitcoin is an electronic code.
“Gold mining is a physical operation which requires huge inputs in terms of drilling and refining to extract the ore, with each ounce of the metal costing $900 to produce,” he adds. “For coins to be mined huge arrays of sophisticated computers are used to unlock codes.”
It is estimated that more than $2bn is being spent each year on bitcoin mining – just one of more than 100 crypto-currencies – which uses more electricity than the whole of Nigeria.
