Investors looking to make an investment in an exciting new area are increasingly turning to cryptocurrencies.
It's no wonder why: Bitcoin, the leading digital currency by market capitalization, has gained nearly 200% since the beginning of 2017. Ethereum, the next biggest currency, has gained more than 3,000% over the same period. (See also: Why Ethereum Prices Reached Record Highs.)
There are new currencies added to the list every month, and a sharp uptick in the number of initial coin offerings, or ICOs, means there are many other new startups and ventures related to the burgeoning crypto industry as well. As investors move to place their assets in the digital realm, demand in other areas seems to be drying up. In fact, gold may have been the most heavily impacted by the recent gains in the cryptocurrency world.
Supply and Demand Question
Cryptocurrency supply has actually dropped fairly significantly in recent months, according to a report by Business Insider. The rate of Bitcoins added to the market has more than halved in the past 12 months, from a rate of 9.3% to 4.4%.
If mining continues to slow down, Bitcoin won't reach its theoretical maximum number of 21 million Bitcoins until the year 2045, if not later. As supply has dwindled, prices have continued to rise.
It seems that the opposite may be true for gold. Gold production has climbed significantly since 2009, now sitting at 3,100 metric tons. This constitutes a record high level of production of the precious metal.
Tom Lee, managing partner and head of research for Fundstrat Global Advisors, indicated in a letter to clients that "cryptocurrencies are cannibalizing demand for gold. Bitcoin is arguably becoming a scarcer store of value. Investors need to identify strategies to leverage this potential rise in cryptocurrencies."
Read more here: http://www.investopedia.com/news/investors-turn-cryptocurrencies-gold-suffers/