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Bitcoin’s (BTC) scarcity highlighted as Russian firm announces 40M troy ounces of gold

A Russian mining firm's announcement of 40 million troy ounces of gold reserves suggests that Bitcoin is more scarce than the precious metal.

Image by WorldSpectrum from Pixabay

Tue, 27 Oct 2020, 13:29 pm UTC

Bitcoin, the world’s biggest cryptocurrency by market capitalization, has been recently compared to gold as investors try to figure out which asset might be a better investment option. Proponents of the precious metal have always highlighted the scarcity of the resource and the relative stability of its price.

But a recent announcement from one of Russia’s largest mining firms suggests that gold might not be as scarce as previously thought. The recent release of the mining company’s estimate of its Sukhoi Log gold deposit seems to suggest that Bitcoin (BTC) might be the more scarce asset, according to Bitcoin.com.

Polyus, Russia's largest gold producer, revealed last week that its Sukhoi Log deposit has an estimated 540 million tons of ore, which contains 40 million troy ounces of gold, Reuters reported. The firm and its partners bought the rights to develop Sukhoi Log in 2017. It is estimated that the area contains a fifth of the country’s total gold reserves.

“We are pleased with the results yielded by our exploration programme at Sukhoi Log,” Polyus CEO Pavel Grachev said in a statement. “The publication ... confirms Sukhoi Log’s position as one of the world’s highest-calibre gold deposits.”

With the 40 million ounces of gold from Sukhoi Log, Polyus becomes the world’s second-biggest gold mining company by attributable reserves. Mined, the reserve will generate $76 billion in revenues for the mining firm based on current prices.

While Polyus’ announcement adds to the proven gold reserves, it is not yet clear just how it will affect the precious metal’s price. Bitcoin.com predicts that gold will likely appreciate even with the increase in supply as it has always been used as a hedge.

“Gold which has traditionally been used as a hedge against inflation is likely to grow in value as the money supply increases,” the publication wrote. “The precious metal behavior contrasts with that of bitcoin, an asset that appears to exhibit an inverse relationship between its circulating supply (or stock) and its price.”

Unlike gold, Bitcoin only has a total maximum supply of 21 million with 18.5 million coins already mined and in circulation. Currently, companies hold almost 4 percent of the total BTC supply but the cryptocurrency is projected to become more scarce in the future with the entry of more institutional investors in the market, which could drive its price upward much faster than gold.

Meanwhile, JP Morgan believes that the increased participation of millennials will further drive the cryptocurrency’s future growth. “The potential long-term upside for bitcoin is considerable as it competes more intensely with gold as an 'alternative' currency we believe, given that Millenials would become over time a more important component of investors' universe,” JP Morgan said in a note on Friday.

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