In an interview on Bloomberg TV’s Surveillance, Citigroup Global Head of G10 FX Strategy, Steven Englander, said that gold buyers are probably the most likely buyers of Bitcoin, however gold and Bitcoin will still fluctuate on the market separately. He said that buyers of both will share a general distrust of the government and their ability to back any fiat currencies.
Fiat currency is classified as currency without intrinsic value that has not been backed by precious metals like gold and silver. The market value of what the currency is made of is not the dollar-value of its actual material worth, even if it is a coin. In 1971, the Nixon administration ended the converting and backing of the U.S. currency with gold and silver, making all U.S. and EU money fiat currencies.
Englander has an extensive financial background and has been with Citigroup since 2010. He formerly worked for Lehman Brothers, Barclays, and the NY Federal Reserve Bank.
Englander stated that throughout history many buyers rush to buy fiat currencies when there is any inkling of any tightening or narrowing of the market by big banks. However, buyers always rush in and raise them up again by buying up the currency. Englander went on to say the people have always been very forgiving of fiat currencies.
In his interview, Englander said that those people that don’t trust the government or big banks will always try and distance themselves from the financial system by making investments outside of the fiat currencies. Many of those buyers will most likely be the ones investing in gold and now Bitcoin.
Bloomberg also shows a clip of Adam Johnson showing the ease of using a private Bitcoin Key in a segment of Friday’s show. During the broadcast the image of the private key was filmed and a viewer was able to scan the code and access the money. This shows that there is always security concerns with investments whether someone steals your debit and credit card numbers or your Bitcoin personal key. The fact that Bloomberg aired the piece is a testament to the growing global interest people now have in Bitcoin as it’s already being paired against some fiat currencies.
Another thing that gold and Bitcoin have in common were that they both took hard hits on their value this year. Bitcoin took a hard tumble this week from a November high of $1,100 to a recent low of $530. The Guardian Liberty Voice covered this crash in the article: Bitcoin Ups and Downs.
Gold prices are also expected to take a tumble as it is currently on course for recording the largest annual loss in the last 32 years. Gold (spot) fell to only $1,298.50 an ounce and gold futures was down to $1,197.70. With gold prices dropping to record lows it is expected to prompt some buyers to want to liquidate their gold, especially since Federal tightening may also cause rising interest rates. These factors will likely influence gold buyers to sell as the cost of carrying the gold will also rise.
Since some gold buyers may be looking to sell off their gold, it just may be that they are the most likely to buy Bitcoin instead.
By Brent Matsalla