Bitcoin vs Gold: Is One Better?
Unsettlingly, it’s becoming harder and harder to remember a time when the words ‘recession’ or ‘austerity’ weren’t thrown around in every other sentence by governments all over the world.
While it’s impossible for us to truly know how much of it is real and how much is an excuse to increase living costs, one thing is for certain - the value of gold is the most stable asset of all.
Among all the chaos of recessions, market crashes, pandemics, and inflation, gold seems to come out strong every time.
So, is it the only commodity worth investing in? Or should people have the same faith in Bitcoin as they do in gold? Which is better? Let’s take a look.
Bitcoin
Bitcoin is the OG cryptocurrency, although it’s still relatively new having only launched back in early 2009. Bitcoin was created as a way to have a decentralized currency that wasn’t controlled by a central authority or third party, thus giving more power and control to ordinary investors.
The launch of Bitcoin was the beginning of a new era for finance and in the previous 13 years, thousands of new cryptocurrencies have been added to the market.
However, in the early days, Bitcoin was largely misunderstood and therefore, only a few enthusiasts were keen on investing in this new currency. For the first few years, Bitcoin barely broke 10 cents and many people were betting on its failure rather than its success.
But, in 2013, Bitcoin had a rapid increase and finally broke $1000 in the space of just a few months.
While pessimists insisted it was just a bubble and continued to bet against it, those who were in favor came out on top, as the value of Bitcoin only increased for the years to come. Mining pools, farms, and currency exchanges also started to increase and in turn, inadvertently gave more value to Bitcoin.
Bitcoin’s value increased further still when the Covid-19 pandemic hit and economies around the world started to shut down. While all kinds of stocks were falling fast, Bitcoin’s value wasn’t falling at all.
Due to this, investors poured more money into it and by April 2021, Bitcoin's price soared to an all-time high of $64,800.
As of today (March 4, 2022), the value of Bitcoin is $41,579.30, a fairly steep drop from almost a year ago but still at a price that investors could only dream of just a few years ago.
In an economy that is still shaky and reeling from the pandemic, at a time when governments are yet again using the word recession in every other sentence, Bitcoin has held its own.
Gold
Looking back through the history of the stock market, it's evident that gold consistently performs well.
A recent article from fxempire on the stability of gold explains it with the following statement;
“After the gold standard, gold has become more volatile, but the legacy of its stability is still with us. Because gold is the only international currency that can’t be debased, people around the world keep holding on to it as a store of value. This makes gold the most stable currency in the long term. Since the 1930s, when the U.S. dollar has been slowly decoupled from gold, the dollar lost 99% of its value against gold. This is the fate of “paper” currencies.”
Like with Bitcoin, gold held on strong even during the pandemic, the value actually increased and currently stands at a higher price than it did before the pandemic began. Not many commodities can come out of a financial disaster stronger than when it went in.
Important Differences
So, if both gold and Bitcoin have been strong contenders even during times of distress, what are the important differences between them?
1. Time
The first and most obvious key difference between these two commodities is time. Bitcoin has been around for 13 years so far. Gold has been used as currency for thousands of years. Like all assets, the length of time something around certainly helps aid its stability.
2. Regulation
In order to make it impossible to fraudulently replicate, gold has created a system for weighing, tracking, and trading that is more or less flawless. This system also makes it difficult for people to steal gold, especially in large quantities such as from a bank since all bars can be traced by identifying numbers.
When crossing over into other countries, customs are likely to take gold off you if you do not carry permission. And investment in gold will require you to do so through legitimate and registered brokers and dealers.
Gold is heavily regulated and a safe asset, although it’s not advisable to store it in your own home unless you have an uber-secure place for it to go.
On the other hand, Bitcoin is far less regulated due to its nature of being decentralized and its element of anonymity/pseudonymity.
Bitcoin can also travel borders just with simple transactions and Bitcoin cannot be traced or returned to the owner if they are the victim of a scam.
However, due to the structure of the blockchain, it is impossible to create fraudulent Bitcoin or for people to steal Bitcoin from other users with hacking. It’s a secure commodity in this regard.
3. Liquidity
Bitcoin is not always the best option if you want something that can be liquid at any given moment. For example, an exchange such as Coinbase will only let you liquidate $50,000 worth of Bitcoin per day. Whereas there are never limits on gold and thus you can get your hands on cash much faster.
4. Utility
Gold was one of the first precious metals to be used as a currency. Thousands of years ago, gold was used in exchange for livestock, building supplies, and other valuables. Gold coins were created and used to pay taxes. Gold's use as a currency has been long and important, and steady.
Even today, gold can be used in the exchange for goods and services just like in ancient times. There are few things, both past and present, that one can’t or couldn’t buy using gold. It’s widely accepted and valuable in every part of the world.
On the contrary, Bitcoin is limited in its utility. While the number of businesses accepting Bitcoin as a payment method is increasing, it’s still a relatively small list. There are far more places, right now, that don’t accept Bitcoin as payment than do. This limitation, for now, of course, poses a few issues.
5. Volatility
Bitcoin, for several reasons which you can read about here, is seen as extremely volatile. The influence the media has on this crypto, along with its young age and lack of confidence all contribute to its price swings, flash crashes, and panic decisions from investors.
However, due to the reasons already discussed, gold is not susceptible to the same kind of volatility. It doesn't spiral or crash like Bitcoin, and is overall, a very stable asset.
Is One Better?
Both have their pros and cons, both have their individual uses, and their own set of enthusiasts. However, it’s always better to have a diverse portfolio rather than focus on only one commodity.
Your investment goals, experience, your speculation, and own risk intolerance will all contribute towards deciding which one is better for you.
Bitcoin vs Gold FAQs
Is Bitcoin Rarer Than Gold?
Gold is rare compared to other precious metals. Bitcoin is rare compared to other cryptocurrencies since it has a limit of 21 million. It’s not possible to directly compare gold with Bitcoin since they belong in entirely different categories.
Is Bitcoin Like Gold?
Bitcoin is not like gold in any way. Both are used to buy different things, both hold different amounts of value and power, and one is regulated while the other isn’t.
Is Bitcoin a Better Investment Than Gold?
Your investment goals, experience, your speculation, and own risk intolerance will all contribute towards deciding which one is better for you. Bitcoin is certainly a more volatile option and, therefore, riskier, but that doesn’t make it a bad investment. But the final choline is yours alone.
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