Reversion from Bitcoin back to gold? Really?

pic smoking.jpg

Whatever Mark Mobius was having, I'll have some of that. I mean what was this guy smoking when he said that the Chinese ICO ban could mean a rush back to gold.

Yes the market took a quick nosedive. But Bitcoin and its associates are still going strong and are on its way to full recovery, soon to reach new highs once more.

So who is Mark Mobius and why is he wrong?

Mark Mobius is an executive chairman of Templeton Emerging Markets Group with 40+ years experience in the Emerging Markets (EM) sector and is quoted as a 'market guru' by some. He has written quite a few books introducing concepts like EM, equities and FX. More impressive was the fact he was named by Asiamoney as one of the top 100 most influential people.

Alright, well I never heard of him before though, but I am sure he has heard of me neither. But that is not the point. His reasons for saying Gold may win territory from Bitcoin in the future are flawed. Lets cover them one by one.

He says that cryptocurrencies are getting out of control and will attract more and more attention from governments around the world. He continues:

"You’re going to get a reversion back to Gold because people are going to wonder, can I really trust these currencies?"

Because of this investors would trust cryptos less and would flock to gold again as a safe haven.

Related to that he says that people need trust to invest in assets and he believes trust will decrease in the future.

"People need a means of exchange and they need to trust that. Right now the trust is good — with Bitcoin people are buying and selling it, they think it’s a reasonable market — but there will come a day when government crackdowns come in and you begin to see the currency come down."

There are a few things that I think are wrong with these statements:

Regulation in the crypto space is much needed. Too many people are being scammed and/or stolen from as investors are not protected (even from themselves in certain cases). The bad name and reputation the cryptocurrencies are getting due to fraud and scams may very well have a very negative impact on the market currently. For this reason I can only welcome sensible regulation from the authorities, around cryptos but more so around ICOs. With regards to China I believe they will adapt the legislation once they have gotten a handle on the situation.
Trust in crypto currency is gaining very rapidly. The reason for that is more general adoption of cryptos and ofcourse associated price gains but also the fact that it does not correlate with the more traditional markets. Bitcoin has proven to be a very effective safe haven for investors.
The fact that more governments will get involved in cryptocurrencies is not a bad development either. As stated in the first point, it is much needed. But it will also create awareness for people who are not involved in cryptos as of yet. In addition, many central banks may resort to buying cryptos to hold as part of their diverse set of assets as well.
Some institutions or investment firms require certain regulation to be able to invest in new assets. In the US we have seen many investment firms now being able to invest due to approved derivatives on exchanges.

All in all, I believe this market does need better regulation. If we can weed out the fraudsters and the scammers that would be good for everyone else. Of course utter bureaucracy needs to be avoided as well, but in my view it doesn't have to come to that to protect investors. Surely there can be a better balance between the two and I believe the scale is currently pointing too much to the Wild West of cryptocurrencies.

I would be very interested to hear your opinions on this matter. So please let me know what you think about the subject of regulation in the comments below and stay tuned for next time!

References:
https://cointelegraph.com/news/chinas-ico-crackdown-could-see-rush-back-to-gold-mark-mobius
http://www.livetradingnews.com/cryptocurrency-crackdown-sparks-rush-gold-53944.html#.WbBfdciGM2y
http://mobius.blog.franklintempleton.com/about-me/
Images:
http://www.dailymail.co.uk/health/article-3698997/How-marijuana-joint-think-experts-find.html