Why did Bitcoin beat oil in the current context?

Extreme volatility. Sudden price loss. Place of purpose value storage. Economic barriers. Alternatives to gold. These are all in common that oil and Bitcoin have. Both markets were affected by the economic downturn caused by Covid-19, but while Bitcoin was somewhat stable, oil still plummeted. So, what does digital gold have that black gold rivals don't have?

Oil continued to plummet

The oil market has been under pressure from three scourge plots to create genuine black swan events:

  • Fierce competition: From the ever-expanding U.S. shale industry to the endless wells of Saudi Arabia, oil has never been more abundant.

  • Demand dropped: Even before the Corona virus spread, oil demand has dropped. The global travel ban and quarantine exacerbated this.

  • Price war: Saudi Arabia and Russia have long shook hands to maintain stable oil prices. After that, they had a conflict in early March and oil plunged 30% in a day, making the situation worse.

The third incident deeply affected the price reduction process of oil. Like energy expert Greg Brew comment"If desired, Saudi Arabia can quickly increase production and push products to market with scales that other manufacturers cannot match."

“TRC may enter to control US production amid global economic recession and persistent oversupply.

Once again we see what happened in the years 1931-1933 ”

The United States began stockpiling oil

The US Department of Energy has begun buying cheap oil for Strategic Oil Reserves, but can only add 2 million barrels a day and in 4 months they will reach capacity. While, Texas Oil production is to be halted in the near future, as falling prices have caused losses in commodity trading. West Texas Intermediate Oil (WTI - used to determine US benchmark oil price) is under $ 20, while Brent is trading at $ 27. It is likely that the price will continue to fall. Paul Sankey, executive director at Mizuho Securities, to speak with Fox Business that "oil prices may be negative." That is, the cost of extraction and storage may exceed the market price.

The same thing can happen with Bitcoin, when the cost of mining 1 coin exceeds its market value. However, in such cases, both Bitcoin and oil are not subject to the "death spiral", as there are always entities that continue to profitably ensure that the constant supply is maintained. The world consumes 100 million barrels of oil a day and has storage capacity 1.5 billion barrels. Once the stockpile is full, if oil demand is still not increasing, there is no other option but to stop production at facilities operating at a loss.

Gold 1

Performance of WTI oil so far (Unit: USD / barrel)

Bitcoin and oil: The two commodities have a lot in common

The commodity that Bitcoin is most frequently compared to is gold, but it also bears some similarities with oil. In addition to digital / physical duality, there are some points where Bitcoin and oil overlap. Oil is more likely to be stored by whales, that is, those with great purchasing power that control the market. And both assets are badly affected by 2020, after a long period of stability making them a store of value. However, last week, oil and Bitcoin broke the trend, because instead of maintaining the same downward trajectory as before, BTC has regained some profit.

Gold 2

Brent oil performance to date (Unit: USD / carton)

Abundance and scarcity

Bitcoin is scarce but oil is abundant. Both resources will eventually run out, but the circulating Bitcoin can be reused, i.e. bought and sold on the open market, ensuring that everyone who wants it can buy it. In contrast, only a small part of the oil can be recycled, resulting in continuous extraction to meet current needs. Saudi Arabia and Russia have quantities oil "Abundant" and can reduce prices as long as you like, if these two countries are still engulfed in price wars. On the other hand, Bitcoin is not easy to manipulate and if it is then certainly not too long.

Regional restrictions and no borders

Oil exploration is associated with important global regions such as the Middle East, Russia, North Sea, North and South America. Meanwhile, Bitcoin is borderless. Although digital gold mining is linked to certain hot spots like China, Iran, North America, and Scandinavia it can be mined anywhere. As such, it is less affected by geopolitical conflicts, cooperation agreements and price wars.

The performance of Bitcoin from the beginning of the year until now

Compact compared to bulky

Like Bitcoin miners hoarding in the hope of selling higher prices in the future, oil producers also stockpile. The difficulty is that the oil requires large storage and tanks, while all existing Bitcoin can be stored on SD cards the size of a thumb. The only 'pipeline' that Bitcoin crosses is the data lines of the internet.

Bitcoin used to buy oil?

Bitcoin and oil always operate in separate domains. But what if the couple became a trading partner in which Bitcoin was used to pay for oil? This concept doesn't sound weird. The launch of Venezuela's digital currency Petro is an attempt to stay away from Petrodollar and the hegemony it grants to the United States. However, the Petro did not attract attention while Bitcoin was still the focus of discussion for many countries seeking to stay away from the US Dollar.


Performance from the beginning of the year to the present BTC (orange), USD (green), gold (gold), silver (white), crude oil (purple), U.S. stocks (blue).

Digital asset strategy director Gabor Gurbacs at VanEck believes that any country investing heavily in energy should research Bitcoin. Brother to speak:

"While the current Petrodollar system is still dominant and the US dollar outperforms other currencies, sovereign nations are flocking to find more alternatives," although acknowledging the that because "Bitcoin is a relatively young asset, it is not yet a complete store of value."

If there is a vacant position ready to replace Petrodollar, Bitcoin is the first option to fill in. At the same time, it remains a safer shelter than oil.

Minh Anh

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Nguyen Diep

My name is Nguyen Manh Cuong. I was born in a poor village in Ba Vi district, HA NOI province - windy and sunny land. Currently

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