Are you wondering if Bitcoin can compete with gold as value storage? Here’s a complete guide on the possibility of Bitcoin competing with gold as a value storage.
Bitcoin differs from gold due to a few features. Gold has been around for a long time, and people have used it as an asset that holds value and a hedge against market downturns. This virtual currency is still new because it has been around for thirteen years but has proven to be profitable and not only a store of value but also a hedge against inflation.
Nevertheless, gold performs well during economic turmoils since its value and price remains relatively stable. But the rise in interest among investors as they move from stocks to gold during a recession is threatening.
Gold has served as a hedge against recession and inflation, and people have used it as a store of value for a long time, even before Bitcoin’s creation. But some people have used this digital currency as a medium of exchange and a symbol of prosperity. In addition, people prefer this digital asset since it is decentralized and no single entity can destroy it. Gold is more physical; therefore, people can mold or shape it for industrial applications. Also, gold still holds its physical natural beauty since it shines a lot.
Modern investors are interested in investing in gold due to its unique characteristics as storage of wealth and can be used to diversify a portfolio. As a means of diversifying your portfolio, gold provides a strategic role as a hedge against the market.
On the contrary, this digital currency is decentralized and has no central authority. Bitcoin also uses blockchain technology to record and verify transactions. Also, blockchain facilitates peer-to-peer transactions whereby two people agree on a trade and record it on a public distributed ledger. Also, you can get this virtual money through mining, whereby if you successfully solve a complex equation, the Bitcoin system rewards you with new coins. Here are a few significant ways in which Bitcoin and gold differ.
Most investors prefer gold because of its low volatility features. Moreover, some financial experts claim that people should measure most commodity prices against gold because it has remained a fundamental source of economic value for many years. On the other hand, Bitcoin is one of the most volatile assets with very major price swings. Therefore, this digital money has a higher chance of high rewards and risks. Either way, the volatility of this digital money is an advantage for investors who can buy Bitcoin and hold it for a long time. Eventually, this digital currency has a much upside potential than gold which has a more downside potential.
Gold has been around for a long time. Therefore, when you want to sell it, there is always a buyer in the market willing to purchase your gold. Gold, one of the most traded assets, provides a high level of liquidity. However, you have to get out there to sell your gold. On the other hand, Bitcoin is also a liquid asset. There has been an increase in the adoption rate of this digital money, including mainstream. Nevertheless, a high population of people is willing to sell and buy this digital money via reputable exchanges like the Bitcoin Motion
Gold is a physical commodity. Therefore, investors can store it in banks or safe deposit boxes. More so, gold bugs have a vital safety net when it comes to security since their gold will still be valuable in the long term. On the contrary, this digital currency has proven to be one of the most secure cryptocurrencies, even though it is a new technology like the rest. Hence, it has security concerns.
The term store of value describes assets that can maintain their worth even during economic turmoil. Bitcoin has shown it can be a good store of value. However, it is difficult for Bitcoin to compete with gold. People have tested and proven gold’s worth even during economic difficulties. Nevertheless, even Bitcoin is establishing its use as value storage since it didn’t lose value during the Covid-19 pandemic.