Bitcoin an 'Emerging Competitor' to Gold, Says CME's Chief Economist

Blu Putnam said gold's ongoing production, likely to increase this year, contrasts with bitcoin's fixed supply.

Feb 4, 2021 at 8:41 a.m. UTC
Updated Sep 14, 2021 at 12:06 p.m. UTC

Bluford Putnam, chief economist and managing director of CME Group, believes bitcoin is an "emerging competitor" to gold.

In a CME-presented explainer video posted by Bloomberg on Wednesday, Putnam said the yellow metal's ongoing production, likely to increase in 2021, contrasts with bitcoin's fixed supply.

The World Gold Council estimates roughly 197,576 metric tonnes (217,790 tons) of the shiny metal have been mined throughout history with an additional 2,500-3,000 tonnes (2,756-3,306 tons) added to stock levels each year.

By contrast, bitcoin is designed to have a fixed supply of 21 million units – the maximum that can ever be created as "block rewards" obtained via proof-of-work mining. To date, 18.62 million BTC have already been mined.

However, Putnam cautioned viewers that fixed supply does not necessarily equate to less volatility. In fact, the opposite is more true when supply is relatively inelastic.

"Shifting patterns with demand can have very large and abrupt impacts on prices, bitcoin has illustrated this point," he said.

Putnam noted his firm has begun to notice gold's waning appeal as a hedge against global political risk.

"In the 2017-2020 period, the mostly ups and occasional downs of the gold price appeared to be directly tied to [U.S. Federal Reserve] policy shifts more than anything else," he said.

The chief economist added that, since equities respond to the same driving force in markets around the world, the gold-equity relationship tends to become tighter, thus weakening gold's safe-haven appeal.

The Festival for the Decentralized World
Thursday - Sunday, June 9-12, 2022
Austin, Texas
Save a Seat Now

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Trending

1
Do Kwon Pushes On-Chain Proposal Live Even as 92% Vote 'No' in Online Poll

The plan to put Terra back on track after last week’s implosion was made live this morning, but online poll results suggest the community is against the move.

The plan to put Terra back on track after last week’s implosion was made live this morning, but online poll results suggest the community is against the move.

2
Binance in Talks for Regulatory Approval in Germany, CEO Says

The crypto exchange's founder and CEO said Binance is recruiting compliance personnel for its team in Germany and hopes to win a license there.

The crypto exchange's founder and CEO said Binance is recruiting compliance personnel for its team in Germany and hopes to win a license there.

3
Blockchain Gaming Developer N3TWORK Studios Closes $46M Funding Led by Griffin Gaming

The firm will release two crypto-native games focused around Web 3 following the Series A raise.

The firm will release two crypto-native games focused around Web 3 following the Series A raise.

4
Bitcoin, Major Cryptos Slide as Markets Digest Hawkish Powell Remarks

A day after the U.S. Federal Reserve chair pledged to keep tightening monetary conditions until inflation comes down, analysts and traders from crypto to stocks and futures were assessing the economic impact – from higher mortgage rates to lower company earnings.

A day after the U.S. Federal Reserve chair pledged to keep tightening monetary conditions until inflation comes down, analysts and traders from crypto to stocks and futures were assessing the economic impact – from higher mortgage rates to lower company earnings.