https://www.bloomberg.com/news/articles/2018-01-17/online-gold-sales-quintupled-as-bitcoin-plunged-coininvest-says
Amid the wild Bitcoin ride that’s wiped more than 40 percent off the
cryptocurrency’s price in a month, a pattern may be emerging: sellers
are switching out of digital gold and into the real thing.
Bullion
dealer Sharps Pixley, a subsidiary of Europe’s largest precious metal
coin and bar outlet regularly sees trades north of a million pounds,
while sales of gold coins at Frankfurt-based CoinInvest jumped fivefold
as the largest digital asset collapsed after surging 1,400 percent last
year, according to Director Daniel Marburger.
“Yesterday
was a hell of a crazy day,” he said from Frankfurt. “Emails and phones
did not stand still with customers asking how they could turn their
crypto into gold.”
The current price swings across seemingly every
cryptocurrency are bringing to the fore a question that has loomed over
the industry since its inception: to what extent can a virtual asset be a
store of value? By swapping out of digital gold and into the real
thing, some investors may be providing an answer.
After Gold Rush
Ross
Norman, a gold dealer with a store tucked in a corner of London
frequented by the upper classes, started exchanging gold for bitcoin via
an intermediary three months ago. He describes his customers as almost
embarrassed by their new-found fortunes. They often store it in safety
deposit boxes in his underground vault, following extensive
due-diligence to prevent money laundering.
“We’re seeing trades
north of a million pounds every couple of weeks,” said Norman from his
shop in St James’s St. “It’s been a welcome addition to our business in a
period when physical demand from more traditional sources has been
subdued.”
Customers as young as 25 come in carrying laptops
holding bitcoin they accumulated when it traded at $1 or below. One,
Norman said, had 1,000 bitcoin he intends to turn into physical metal.
The company, owned by Degussa Goldhandel GmbH, doesn’t take possession
of bitcoin. Customers buy via an intermediary.
“Bitcoin is a bit
of a lobster pot -- it’s easy to get in, but hard to get out,” Norman
said. “Gold also offers investors 4,000 years of history as a store of
value, and that’s looking quite appealing right now.”
Lack of demand hasn’t proved much of a headwind to gold
prices in recent weeks. The yellow metal, supported by a falling dollar,
rallied 7.5 percent in the past month to a four-month high before
tempering gains. Bitcoin fluctuated on Wednesday, but was about 44
percent lower than its peak in December.
Marburger said CoinInvest
sold almost 30 kilograms of gold, worth $1.2 million in the spot
market, as Bitcoin dropped 23 percent on Tuesday. One bitcoin buys about
eight one-ounce Britannia gold coins, he said.
It was a similar
story at GoldCore Ltd., where clients have been diversifying away from
cryptocurrencies and into physical gold in both bars and coins,
according to Director Mark O’Byrne.
“They told us they were
concerned that the massive price appreciation was unsustainable and they
got nervous about it,” he said in an emailed note. “We think
increasingly people are realizing that these digital assets have much
higher risk levels than the traditional safe haven asset.”
But
Marburger at CoinInvest says physical gold bullion also holds attraction
for bitcoin investors because the assets have much in common.
“Both
are limited in quantity, easy to trade and you can store them
decentralized,” he said. Gold has advantages because there are “no
passwords you can lose, the volatility is much lower, sustainable growth
and in the end you can hold your investment in your hands,” he said.
Bitcoin
dropped below $10,000 on Wednesday and was trading 5 percent lower at
$10,132 at 11:45 a.m. New York time. It reached a record high of $19,511
on Dec. 18. Gold was 0.4 percent lower at $1,332.48.
— With assistance by Todd White
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