Cryptocurrency: Impact on Gold Mining
The research provides a high-level overview of how cryptocurrency is expected to or may affect the global gold mining industry and how Bitcoin, which accounts for 2/3 of the crypto market, is affecting gold mining. A deep dive into these findings have been detailed below.
How Cryptocurrency is Affecting the Gold Mining Industry
- The technology driving cryptocurrencies, blockchain, is considered to guarantee the ethical provenance of gold mined in small operations, both by luxury jewelry powerhouses and by the mining industry.
- A cryptocurrency-backed system has proven successful in tracing gold from specific mine pits through the supply chain on a pilot project in Tanzania, a country with an estimated 1.5 million artisanal gold miners.
- Ethereum cryptocurrency has been used to design a custom system that accomplishes the task of gold market regulation and streamlines the work among suppliers and gold recipients.
- Because the system is still in its early stages, the future product will address two issues: tracking the origin of gold and automating document circulation between gold mines, refineries, and other gold industry participants.
How Bitcoin is Affecting the Gold Mining Industry
- DeVere's most recent study found that more than 60% (2/3) of millennials "prefer bitcoin to gold as an investment. This means any new savings entering the market may be almost 70% more likely to be put into bitcoin than into gold." As such, the rise in bitcoin's popularity could affect the price of gold, which could bring in big losses for gold miners.
- Following the halving of bitcoin in May 2020, its inflation rate will be similar to gold's, and for the rest of the twenty-first century, both the gold mining industry and bitcoin will see a rise in their stock fall.
- Bitcoin market indicators have worked for gold. In particular, given that actual long-term interest rates—bond yields after inflation adjustment—have decreased, gold has rebounded.
- Gold has been quietly on the rise this month, despite being overshadowed by the wild swings in Bitcoin and other cryptocurrencies.
- Even more than the gold itself, shares of gold miners have recovered and gained relative strength in comparison to the overall stock market.
- As many traders and hedge funds do with gold miners, digital asset strategists are more likely to trade bitcoin miners during a bull market run than see them as long-term investments.