Bitcoin has been labeled as the ‘digital gold’ by some crypto enthusiasts. BTC and gold are both valuable assets that can be used to hedge against inflation.
The crypto market has been bearish for most of 2022 with prices of Bitcoin and several other altcoins nearing their all-time low. Despite this, some investors are still buying the dip for an expected bullish market.
One of the bitcoin investors is Microstrategy CEO, Michael Saylor, who recently bought $4 billion worth of BTC. He has also claimed that BTC is more valuable than gold but how true is this?
In this article, we’ll look at both bitcoin and gold and see if one is more valuable than the other. Before then, let’s learn more about bitcoin and gold.
What is Bitcoin?
Bitcoin is a type of digital currency created for use in peer-to-peer online transactions. It was created in 2008 by a person or group using the name Satoshi Nakamoto.
Bitcoin is the biggest cryptocurrency that exists mainly as computer code. It is decentralized meaning that there is no central issuing authority. It was introduced as a solution to the global financial crisis of 2008.
Bitcoin, which has been referred to as digital gold is the first created virtual currency. Several other cryptocurrencies like it which are referred to as ”altcoins” has also been created. Today, there are over twenty thousand cryptocurrencies.
Satoshi Nakamoto introduced coin trades with the symbol BTC. In November 2021, the price of a 1 BTC soared beyond $65,000, setting a new record high. However, the price has been down in 2022. As of this writing, the price of BTC is $20,112.85. It has moved closer to its all-time low as the price was at the eighteen thousand USD mark for most of the year.
What is a Gold?
Gold is a yellow metallic element that occurs naturally in pure form and is used especially in coins, jewelry, and electronics.
Gold has been in existence for ages past and has been used as a form of payment all around the world. The U.S. monetary system was based on a gold standard until the 1970s. It hasn’t lost its value till today and has surpassed every other commodity.
Gold is being mined but the easiest way to gain exposure to gold is through the stock market. Through this means, one can invest in gold bullion or the shares of gold-mining companies.
As of this writing, the gold price has extended its gains to near $1,630.00 after rebounding from $1,621.14. Gold is certainly a good bet against inflation.
What do Bitcoin and Gold Have in Common?
Gold is always labeled as a ‘Safe Haven‘ as it is the best hedge against inflation. Bitcoin, which is digital gold is also a tool for hedging against inflation. There is a major similarity between both the ‘golden‘ gold and the digital gold, bitcoin.
They are both used as a store of value in this case. One who holds gold is hedged against a falling dollar. This comes to play when inflation rises and surpasses the value of the dollar, the cost of every ounce of gold in dollars will also rise. The investor is, however, compensated for this inflation with more dollars for each ounce of gold.
Bitcoin, on the other hand, can also be used as a store of value. You can hold on to bitcoin and several other cryptocurrencies on a long-term basis which protects against inflation.
Another major similarity is that both pass through the process of mining. As gold passes through physical mining, bitcoin can be mined using powerful computers with much energy being consumed.
What are the Differences Between Gold & Bitcoin?
There are several differences between gold and bitcoin even though they can serve the same purpose. The fact that gold can be seen physically while bitcoin is virtual/digital makes them come from two different worlds.
Another difference is their year of existence. Gold has been in existence for long years with much history to it. Bitcoin, however, was created over a decade ago. For this reason, gold is confirmed as the best hedge against inflation.
The demand for bitcoin and other cryptocurrencies is however on the increase. It is easily accessible when compared to gold. With your mobile phone and internet, you can purchase these digital currencies. This is however different from gold.
Is Bitcoin More Valuable Than Gold?
Bitcoin and several other cryptocurrencies aren’t doing well as of writing. Bitcoin, which is the largest and biggest cryptocurrency today is three times lower than its all-time low. This has made some traders sell their bitcoins and other crypto assets. Yet, some crypto investors believe it’ll soar again.
Like, Michael Saylor, many are buying the dip, an investment strategy that BTC and other cryptos will thrive on again. The aforementioned Microstrategy CEO has stated that bitcoin is to replace gold as a non-sovereign store of value asset. His opinion has been backed by several other crypto enthusiasts.
As of this writing, gold is a $10 trillion asset while the market capitalization of cryptocurrency has been up and down the $1 trillion mark. Saylor has also argued that bitcoin is ten times better than gold.
With the rate at which bitcoin has grown in the past couple of years, it has been predicted that its price tag may reach $500,000 within the next decade. This would make it surpass the yellow metal in the long run.
Gold and bitcoin are both regarded as valuable assets that can be used to hedge against inflation. Bitcoin has been predicted to overtake gold in the years to come despite its price fluctuation and issues today.