Bitcoin VS Gold

Over the years, investors and market observes have drawn a series of comparisons between Bitcoin and Gold. Both have proved to be useful, and investors have used them as a speculative investment at one point or another. Even though most analysts have compared the two, there is still a big difference between Bitcoin and Gold. Bitcoin is a digital creation in terms of the assets' nature. At the same time, Gold is a physical asset (safe-haven asset).

In this article, we’ll be looking at Bitcoin vs. Gold. We’ll be looking at the history, comparison, difference between Bitcoin and Gold.

Overview of Bitcoin

Bitcoin is a digital currency that was first seen in 2008. The digital currency leverages blockchain technology to eliminate the role of central authority to make transactions. The Bitcoin blockchain network rewards the node (also called miners) to facilitate these transactions in a decentralized manner. The BTC miners verify transactions and then add those transactions into different blocks, which basically make up the digital currency’s blockchains. 

A new BTC is released whenever the miners complete each block. It takes approximately 10 minutes for a new block to be mined. These new bitcoins can be used by people to transact online. One good thing about bitcoin is that any user can access bitcoin at any location worldwide since it is electronically operated. Cryptocurrencies like BTC permit users to transact with each other, using the internet anywhere globally, and trust the results to be fraud-free.  

Overview of Gold

When the history of currency and transactions is mentioned, Gold is one thing that comes to mind. Gold has been used as a form of money for centuries. The supply of Gold depends on miners who retrieve the precious metal from the ground. Once the precious metal has been mined via underground retrieval, Gold can be used in goods like jewelry.  Due to its scarcity and long-lastivity, gold is considered to be a safe-haven asset across the world.

Furthermore, Gold can be acquired by investors in many ways. Investors can buy bullion, or they can study its price movement through a wide range of financial instruments like exchange-traded funds and gold futures.   

Due to its reliability, Gold has consistently generated significant attention as a safe haven asset. The precious metal broke a record in 2011 when it rose to an all-time high of £1,400, at a time when there were dept issues in Europe and the USA.

Comparison Bitcoin and Gold

For many years, Gold has been leading the safe-haven asset arena. However, barely a few years of Bitcoin’s launching has drawn a wide range of recognition worldwide. The price has risen far beyond expectations, making investors wonder if it will surpass Gold in the years to come.

Below is the comparison of the two-investment options head to head:

Transparency, safety, and Legality

Gold comes with an established system for trading, weighing, and tracking. But it comes with its downsides, such as the likelihood of getting stolen, chances of exchanging it for fake metal, etc. Bitcoin, on the other hand, is almost impossible to corrupt due to its encrypted, decentralized system and complicated algorithms. Above all, BTC is heavily secured, and all transactions are encrypted, which makes it difficult for hackers to hack into the user’s account or steal BTC from the user’s accounts. 

Slow and Steady

Trust and reliability are one major advantage that Gold has over bitcoin. However, as new technological innovations are springing up, the consumer’s preferences are changing, and different government policies could easily relegate bitcoin to the end of the bench.  

According to Spencer Bogart, an analyst with Blockchain Capital, “Gold has unique features which are lacking in Bitcoin. That feature is a more than 1000-year history of being a decent store of value. This is very crucial for trust and people’s willingness to store value in that particular assets.”

Even with governments’ different attempts to restrict its usage, Gold had proven over time to be of value, like the incident of 1933, when President Franklin D Roosevelt implemented different measures to prohibit and criminalize its usage in the USA.

According to Dave Kranzler, an investment Research Dynamics, “Another thing to note is that gold is not dependent on the operation of the internet thereby giving it a maximum degree of protection from heavy-handed regimes; he went further to say that there is nothing that stops the government of a country from shutting down the internet under the disguise of something, thereby limiting the usage of Bitcoin.”

Rarity

Both Bitcoin and Gold are rare resources. The halving of the Bitcoin mining reward has predicted that the 21 million available Bitcoin will be out of circulation by the year 2140. We already know that there is 21 million existing bitcoin, but we cannot predict the same for gold that is yet to be mined on earth. There are also rumors that Gold could be minded from asteroids, and most companies are looking to do that in the future.  

Liquidity

Both Bitcoin and Gold have a very liquid market where users can exchange them using fiat money.  

Volatility

Volatility has proven over time to be a major concern for investors looking towards bitcoin as a safe haven asset. One of the proven evidence of the bitcoin’s high volatility is its price chart in the last few years. In the first quarter of 2018, bitcoin reached its highest price of around $20,000 per coin, and barely a year later, the price dropped to less than $4000. Although it has recovered most of the losses, it is still a source of concern for many investors.  

Definite Value

While Gold has been used to produce different things like jewelry, electronics, etc., Bitcoin has been used for transactions worldwide. With Bitcoin, people that lack access to banking worldwide can use bitcoin for transactions. However, bitcoins true potentials are yet to be fully developed. 

Difference Between Bitcoin and Gold

Intrinsic Value

A microchip containing Gold

Value is defined as something that is subjective. It means that nothing can be said to have “intrinsic value.” However, the term is mostly used to categorize good things. Gold basically fits into things with intrinsic value since it is used in jewelry and as a conductor in electronics throughout the world. It is because Gold is seen as a unique element that is ductile, malleable, non-corrosive, and noble.

Bitcoin, on the other hand, does not have industrial use like Gold. So, we cannot say that it has “intrinsic value” in this case. 

Divisibility

Bitcoin can be approximated to eight decimal places known as Satoshi, and there is also room for increasing the decimal places in the code. So, it means that any amount can be easily separated, sent, or received, making it a currency. However, it can be challenging for a physical entity such as Gold to split it into tiny equally-parted particles.

Wealth Preservation

Coin Gold over 1000 years

Gold has a record dating 5000 years ago as one of the avenues to preserve wealth regardless of the world’s state. We can experience a crisis like war, financial crisis, and gold will still be regarded highly.   

However, we cannot say that for bitcoin for now. BTC requires internet connectivity, which is not something that you would confidently hold onto in the next 50 years. It is because if anything happens with the internet, you might not have access to your Bitcoin again. Also, there is the possibility of BTC breaking due to its volatile nature or future technology. 

Fluid Currency Aspect

Bitcoin’s greatest strength lies in its role as a means of exchange. It is a digital coin that can be sent across the world to any place without going to the bank. It is something that no other fiat currency has at the moment.

However, due to the weight of Gold and authenticity, it is a bit difficult to trade. Even gold coins are going into extinction due to its sheer worth, which is why most people see silver as a better currency than Gold.  

Why Invest in Bitcoin? 

Bitcoin is seen as not just an electronic payment system but also as a store of value. Anyone who’d understand the scarcity of Bitcoin because of its limited supply will definitely invest in it. As the recent trends show, not just individuals, even publicly traded companies, are buying Bitcoins worth millions of dollars to hedge against inflation. 

Bitcoin has come a long way from being traded on the dark web to surviving the crash of late 2017 to becoming the world’s best-performing asset. According to Stephen McKeon, an associate professor of finance at the University of Oregon, “the entire crypto ecosystem has matured substantially’ the question has moved from “will this survive to “how big will this get?”

BTCvsGOLDvsS&P

Why Invest in Gold?

Gold is seen as a safe haven that is utilized by investors when things get ugly. For example, According to Morningstar Data, in the last quarter of 2018, the S&P GSCI Gold Index gained 7.2% at the same time when the stock market fell below 14%. 

Even in the face of the recent crisis, when equities dropped by 33%, the gold index only fell by only 2%. The Gold price then rose over the next few months to record levels. 

However, gold volatility can go in both directions. It can rise and crash. For example, SPDR Gold Shares, one of the leading gold exchange-traded fund (ETF), gained 9.6% in 2011 and then 6.6% in 2012 but lost 28.3% in 2013. The next two years saw then having negative returns.

It means that people might have overvalued Gold and, as such, should not be treated as a main course in your investment portfolio; rather, it should just be treated as a hot sauce.

Conclusion

Looking at both Bitcoin and Gold, it is elementary to see why most gold lovers are quick to accept bitcoin and the vast benefits it brings. Both of them provide a safe avenue for investment for people that don’t believe in the centralized control of the world’s financial system. 

However, in terms of ROI, Bitcoin’s potential is way higher than gold or any other asset in the world.

For more articles about cryptocurrency check out our Top 10 page and follow us on Twitter, Facebook or Instagram.

Written by:  Narender Charan

Share on facebook
Share on twitter
Share on telegram
Share on reddit
Binance logo
WazirX
KuCoin logo
Coinbase logo
Bitmex