Daily Trading Volume In Bitcoin Surpasses GLD

Several weeks after Goldman's chief technician started covering bitcoin, overnight Bank of America has released what some may call an "initiating coverage" report on bitcoin which notes that while the cryptocurrency remains very volatile and risky, bitcoin has experienced a spectacular surge in liquidity in the last six months. However, BofA remains stumped when it comes to making any official forecasts BofA's commodity strategist Francisco Blanch writes that bitcoin is uncorrelated to any financial asset, "so there is no way to explain let alone predict returns."

While we will present some of the more notable findings from the report shortly, one observation caught our attention, namely that in at least one regard, bitcoin has already surpassed gold: the total daily trading bolume for bitcoin has now surpassed that of the biggest gold ETF, the GLD.

As BofA notes, "it is hard to ignore that trading volumes for major digital currencies like bitcoin and ethereum have skyrocketed in recent years. For example, daily trading volumes for bitcoin were $400mn in 2012 and have now moved up to about $2bn a day at present" which also means that - at current BTC prices - the total ADV of BTC traded is higher than that of GLD.

BofA continues:

Meanwhile, ethereum had daily trading volumes of $1.5mn when it first launched in 2015 and it is now experiencing daily trading of about $1bn. Most importantly, for a digital token to become a currency, it must build to a certain scale, a bit like the silver mine in Bolivia found by the Spanish. In some ways, this is exactly what has been happening in recent quarters, with the total market value of digital tokens growing exponentially from $1.5bn to around $87bn at present.

And while Bitcoin liquidity still has a ways to go before catching up to equity and fixed income markets, BofA does note that there is a distinct overlap in the historical price pattern of gold with that of bitcoin:

A big uncertainty facing bitcoin and other digital tokens we see is their expected real rate of return. So far, early adopters have enjoyed a sharp appreciation in prices. While bitcoin seems to have followed a pattern similar to gold over a much more compressed time period (Chart 18), there is no certainty that that will continue and, most certainly, no way to predict it. Also, there are large inherent risks to digital tokens such as fraud, hacking, outright theft, new protocol adoption, limited acceptance, and it is not legal tender in many places in the world.

As Blanch summarizes, "put differently, cryptocurrencies have built scale rapidly and are now accepted as a means of payment by some corporations and individuals."

The only question is if, and when, will cryptos in their current iteration start being accepted by central banks, and more importantly, as pledgeable collateral. More on that shortly.


In Stasis tmosley Tue, 07/25/2017 - 22:36 Permalink

It actually is a defining feature of money:"Durability - The medium of exchange must not weather, fall apart, or become unusable. It must be able to stand the test of time."Electricity disappears and cryptos can't be traded. If key servers break then cryptos can't be traded.It also doesn't meet the requirements for intrinsic value:"Intrinsically Valuable- should be valuable in of itself, and its value should be totally independent of any other object. Essentially, the item must be rare."Cryptos are dependent upon IT infrastructure and a power grid, therefore they are NOT independent. In terms of rarity, anyone can create a crypto currency which has no intrinsic value, but is "worth" something in fiat money because stupid people are willing to buy it.

In reply to by tmosley

tmosley Mementoil Tue, 07/25/2017 - 10:38 Permalink

1. General Acceptability-the dollar wins big, but crypto is making gains. Gold pulling up the rear.2. Portability-crypto wins HUGE3. Indestructibility or Durability-Gold and crypto are both indestructable in any practical sense--crypto requires an event that destroys the internet (which would have to destroy the world, realistically) to be destroyed, while gold needs a particle accelerator or has to be dropped into the heart of a star4. Homogeneity/fungibility-gold, crypto, and dollars all tie here5. Divisibility- gold is technically more divisible for now, but crypto is easier to divide. You don't need change for crypto transactions, so they beat cash, but are in line with digital dollar transactions.6. Malleability-crypto wins big, with gold a distant second7. Cognizability-dollars win big, quasi-tie between gold and crypto, as most people couldn't really tell you if a coin was actually gold or not where it is easy to identify a cryptocurrency, even if most people don't know much about them yet.8. Stability of Value-Gold wins big, but crypto will stabilize once adoption levels off, at whichever level you think that will happen9. No Damage to the Economy from Hoarding-my own addition. Gold loses to crypto and dollars as it has use in industry, but the difference isn't tremendous. This is the same reason why silver would be very bad as money today--it would destroy many industries thanks to the tremendous increase in cost that would come with hoarding as money.In my judgement, crypto has surpassed gold in most aspects, and better, since it can be changed in order to meet market demands, whether through modification of the algorithm (with the implicit endorsement of the market) or via market selection of a crypto with better characteristics. Areas where the dollars exceed seem likely to not be the case for much longer, where areas where cryptos are deficient (stability) are likely to see huge improvements as they are fully adopted.

In reply to by Mementoil

Mementoil tmosley Tue, 07/25/2017 - 10:45 Permalink

The properties you have described are indeed the hallmarks of a good money.But for some reason you have left out the one which I consider to be the most important - according to my definition real money has to have intrinsic value. In other words, it has to be a useful commodity regardless of it's role as a medium of exchange.Both Dollars and Crypto-currencies don't meet this vital condition, and so I don't reagrd them as "real money".

In reply to by tmosley

tmosley Mementoil Tue, 07/25/2017 - 10:51 Permalink

> according to my definition real money has to have intrinsic valueYour definition is wrong.Gold doesn't have value because it is good for coating stereo connectors. Industrial uses for gold are few and far between--negligible in the amount of mine production that they take up. The vast majority goes to jewelry and other forms of hoarding, like real money should.The problem with dollars is that they cost less to issue than they are worth, and as such the supply and hence value of their unit is determined entirely by the discipline of the issuing authority. This is not the case with cryptos, which tend to cost about as much to mine as they are worth. This is a concept related to intrinsic value, but not exactly the same.

In reply to by Mementoil

Mementoil tmosley Tue, 07/25/2017 - 11:10 Permalink

My brother got married recently.He and his wife have no interest in economics and don't give a damn about wealth preservation. And yet he has bought her a gold ring (with a worthless diamond stuck in the middle).The industrial demand for gold is far from negligible, and including jewelry consists over 60% of the yearly production.This demand gives the precious metal a price "floor". Even if investors lose interest in them completely, their price will not go to zero.And in an environment of uncertainty this assurance is very important.This is exactly why the monetary use of gold has persisted for so long, and this is why I am convinced it will continue for centuries to come.

In reply to by tmosley

NugginFuts T-NUTZ Tue, 07/25/2017 - 11:05 Permalink

Dude, seriously, how do you even BUY BTC without USD/euro/Yuan/etc? And you think Central Banks have no way to influence them? They can spontaneously create the billions of dollars necessary both to buy and destroy any crypto currency out there in a matter of minutes. The fact that they haven't done so (yet) is an act of mercy. Just wait until they either A) find a reason to or B) get desperate enough to destroy all competition.

In reply to by T-NUTZ

In Stasis T-NUTZ Tue, 07/25/2017 - 22:46 Permalink

Are we talking Gold physical or Gold paper, because there's a big difference there? Stackers know that Gold and Silver have intrinsic value in of themselves, meaning that we don't care about what the price of GLD and SLV are with fake fiat money. The value of physical is apparent, as it has been apparent for the last 5000 years.And as for cryptos not being subjected to manipulation, don't make me laugh. You buy and sell cryptos with fiat money which is fake, therefore cryptos are based upon a fiat money system. All that needs to happen to move the crypto market is to print more fiat and use it to buy cryptos. 

In reply to by T-NUTZ

Alchemedes Tue, 07/25/2017 - 10:03 Permalink

Ridiculous."The only question is if, and when, will cryptos in their current iteration start being accepted by central banks, and more importantly, as pledgeable collateral." “What is money? Gold is money. Everything else is credit!"  - James Pierpont Morgan.

Mementoil tmosley Tue, 07/25/2017 - 10:54 Permalink

come on, we both know that the governments of the world haven't taken out their big guns yet.No major government has attempted to outlaw the use of crypto-currencies, arrest the owners of a major exchange or prosecute the users, and we both know this is down the line, if they feel threatened enough.

In reply to by tmosley

tmosley Mementoil Tue, 07/25/2017 - 10:58 Permalink

You haven't done much research. Russia did exactly that.The only places where it really remains illegal that I know of offhand are those filled to the brim with poor people who don't even have computers. IE shitholes like Bolivia. Anywhere where people start using it, it takes off, and governments just look like fools trying to command the tides by banning it.

In reply to by Mementoil

Mementoil tmosley Tue, 07/25/2017 - 11:21 Permalink

I don't consider Russia to be a "major government" when it comes to financial warfare. When the US or EU central banks decide it is time to take down cryptos, then the battle will begin in ernest. By the way, I am not rooting for crypto-currencies to lose this war. I am a Libertarian after all.By the way - wasn't Vladimir Putin the one who recently met with the founder of Etherium, in order to discuss the possibility of creating an official Russian crypto-currency?

In reply to by tmosley

NugginFuts Mementoil Tue, 07/25/2017 - 10:58 Permalink

They will either kill it or co-opt it. All of this is to say nothing of CBs, which can "print" their way into billions of dollars of BTC right before pulling the plug and watching it come crashing down. BTC is measured in terms of value in government controlled currencies. Think about that for a second. 

In reply to by Mementoil