When it comes to comparing gold vs. Bitcoin, there are various advantages to each of them. Bitcoin has taken the world by storm. There are lots of new and exciting methods for spending and investing with Bitcoin that are coming online, from buying homes with Bitcoin to Bitcoin IRA solutions.
The explosive growth in Bitcoin has created some speculation regarding the fact that Bitcoin is on the way to replace gold as a safe-haven asset. Even the considerably well-respected analysts, such as Tommy Lee, Fundstrat founder, have implied that this type of transition could conceivably occur, moving Bitcoin into a dual role as both investment and currency.
With all the positive news surrounding Bitcoin, however, there is an equal or even larger amount of detractors, which suggest that Bitcoin is a scam, both as an investment and an asset since it’s based on nothing but consensus.
The CEO of JPMorgan Chase, Jamie Dimon, has called Bitcoin a ‘fraud,’ implying that the lacking of financial support makes it entirely speculative. Other analysts have echoed Dimon, remarking that only consensus backs the cryptocurrency. This agreement could change at a moment’s notice, thereby rendering the cryptocurrency worthless.
Therefore, with the different options, should investors be long on Bitcoin? Or should they stick to conventional investments like gold?
Gold has been the traditional hedge investment for safe-haven investing during times of any geopolitical crisis or financial uncertainty. This investment strategy hasn’t changed that much for the past 100 years.
Since many consider gold to have an intrinsic value, many use it as a safe-haven. Gold will be gold, no matter what happens financially or globally. Gold’s price is connected to its intrinsic quality. This quality can be assessed mainly by comparison with the fiat currency. Gold has shown that it has exceptional resiliency as a stable asset for a store of value. Due to this reason, many use gold as a stable asset that is fixed against market fluctuations.
The gold’s value, however, is more of a theory than a fundamental reality and it varies with the market climate. Gold’s general value is based on its anonymity and the ease of transport for big financial exchanges. Also, as a source of value during uncertainty, gold can endure any political and governmental turbulence.
Because of this, gold can be a comparative hedge against any risk. Therefore, gold can present a method for investor portfolio risk-aversion. This is why the gold price generally remains stable, particularly when it’s considered again against the other more volatile vehicles.
Bitcoin has many of the same properties of gold, as a financial class. Since Bitcoin is broadly regarded as having an effective value, it makes it like gold in its value, based on consensus.
Some argue that the value of gold is based just on consensus. Gold has an intrinsic value since people have assigned the value to it. They argue that because the value is based on consensus, the other assets could also have the same value as gold, solely based on the consensus.
While Bitcoin carries consensus, it’s nevertheless quite volatile. Usually, this volatility is thought to be entirely contrary to a store of value hedge against the market risk. But, since Bitcoin isn’t tied to any particular government, it can regardless function adequately as a hedge investment, while it still offers the potential for substantial returns.
Since Bitcoin carries a growing consensus as a currency, it needs to be acknowledged as such, no matter what the different governments may say. Bitcoin shares the anonymity that turned gold into a safe-haven asset.
With Bitcoin’s consensus and decentralized anonymity, it functions in its essence as a gold-like investment vehicle.
Gold vs. Bitcoin
Bitcoin has both the risk factor of lacking intrinsic value and volatility. Gold is both essential and stable, yet it doesn’t provide the chance to return the same way that Bitcoin and the other cryptocurrencies do.
Several companies try to bridge the gold/Bitcoin gap use blockchain technology for creating tokenized gold assets. This moves gold’s intrinsic value into the cryptosphere, thereby efficiently digitizing gold as an asset.
For example, Goldmint created a system where ‘GOLD’ tokens are produced by bringing gold items to a local Custody Bot developed by Goldmine. This Custody Bot is a machine which weighs and grades any gold objects. It then sends the user’s wallet the appropriate amount of GOLD tokens.
Through digital exchanges, the GOLD tokens can get converted to Bitcoin or fiat currency. Or the GOLD token can be held by investors as a gold-backed store of value. This type of system unites gold’s power as a stable asset with the market potential and liquidity of Bitcoin.