Let’s start off with facts; Bitcoin is the best-performing asset class in the 2010s in cryptocurrency, while gold has been a store of value for thousands of years.
With that said, a majority of analysts and investors believe that Bitcoin will take market share away from gold in 2022 as digital assets.
Citing bitcoin’s $700 billion market capitalization, compared to the around $2.6 trillion worth of gold owned as an investment, analysts believe that the cryptocurrency currently has a 20% share of the “store of value” market.
Bitcoin is a limited digital asset, as after the 21 million are mined (predicted to be in 2140), there will never be more Bitcoin released. This makes it similar to gold in terms of scarcity.
Gold is an asset that will eventually deplete regardless of how many nuggets we capitalise. Easy mining of gold will run out by approximately 2050.
“For long Gold has been the defacto hedge against inflation. It can be stolen, need to be stored and would usually need maintenance,” says Vinshu Gupta, Founder & Director, Nonceblox Blockchain Studio.
“It was one of the few trusted investments for old money but not anymore. Investors have started to look at bitcoins as future gold. It is purely decentralised, has no storage or maintenance issues and can’t be stolen. Calling it only a hedge might not be full justice, I would rather call it the most lucrative asset on the face of earth and mars.”
Below are 4 features that make Bitcoin not just similar but a better asset than Gold
● Rarity: Bitcoin is rare. It cannot be created at will; there are only 21 million of them, and no one can create more. That means that no government can control it or fake it. No one is going to create more gold which will be feasible. The scarcity of gold changes depending on how much you put into finding it.
● Durability – Both bitcoins and gold are almost perfectly durable. As long as the internet operates, bitcoin will be in use. As far back as it can be traced, gold has been used to make jewellery, trade, etc.
● Divisibility – Bitcoin can be divided into individual satoshis, with 100,000,000 satoshis making up 1 BTC. Gold cannot be divided as easily or as precisely but it can be minted in smaller denominations
● They are hard to fake – Bitcoin and gold can’t be counterfeited and duplicated. Bitcoin is easy to recognize and impossible to counterfeit. Gold is pretty recognizable, though it must be tested for purity under some circumstances.
Which is better depends upon your risk tolerance, investing strategy, how much capital you have to use, and how much you can tolerate losing. Bitcoin is much more volatile than gold, making it a riskier investment than gold.
Bitcoin has been much more volatile than gold over the last two years, therefore adding additional risk to investment portfolios. The World Gold Council suggests that portfolios with high allocations of Bitcoin- or cryptocurrencies- may benefit from higher allocations to gold due to its role as a hedge against risk.
Fundamentally, investors are regarding gold and cryptocurrencies as having very different roles within an investment portfolio.
A 2019 survey by The World Gold Council revealed that investors view cryptocurrency as a more speculative investment and value it for its opportunity to achieve returns in the short term. Gold, on the other hand, was valued for its strategic role in preserving wealth over the long term and for its position as a hedge against riskier investment options.
These are just but a few examples. At Market Cap Trainers, we offer personal finance education, Investment opportunities and other financial services. Just reach us through our contacts: Info@marketcap.co.ke or 0765 093983 for any inquiries.