Bitcoin as an investment?
It’s natural for economists to give gold a better score when comparing Bitcoin versus Gold for investment purposes. Gold has been studied, traded and invested in for over a thousands of years. It has been an integral part of human civilization for a long time and has an undeniable track record that can be traced to the earliest civilizations on earth.
So it makes sense that a majority of economists (Paul Krugman included) have more faith in the precious metal than the relatively new digital currency.
However, for the believers, one reason that pushes them towards the credibility of bitcoin versus gold as an investment is that it is only about five years old. and, it is already competing with gold.
But, the golden question here is.
Are there similarities between gold and bitcoin?
After all, bitcoin has taken the world by storm and there is speculation that it will soon surpass gold in terms of popularity. Here are a few attributes that are inherent in both bitcoin and gold
Looking at the Bitcoin versus Gold Price Movement
Limited Availability of the two assets
Gold’s cultural value and importance comes from its scarcity. Gold is available in limited quantities to meet its demand. It is estimated that in the entire history of man kind only 171,300 tonnes of gold have been extracted.
The story is similar for bitcoins. There will only ever be a limited quantity of 21 million bitcoins in circulation, which is probably going to be reached far off into the future, the majority opinion is 2141.
Those are just a few of the reasons why people think both gold and bitcoins are precious when analyzing Bitcoin versus Gold.
Bitcoin and gold are backed by no one. While there are real market values for both, they are neither controlled nor governed by any central agency. This makes the prices of both adjust according to demands in a transparent manner.
Both have value due to the reason that society has faith that they will keep said value over time. Some say gold has industrial use, but the majority of gold is purchased for investment. Don’t forget, both gold and bitcoin are open source.
No Intrinsic Value
Both gold and bitcoin have no intrinsic value in my opinion. They are of no use if, say, an apocalypse arrives. They have demand but are not something which can be used to meet our basic needs like food and water.
Sure, you can use gold to get money but it is again due to the fact that society has faith in it. In many places the situation for bitcoin is the same.
When it comes to Bitcoin versus Gold
Bitcoin is built with the ubiquitous internet revolution in mind. It has some ideal attributes of the online world: decentralization, transparency, cryptography and is peer to peer. Gold has none of this and it is really heavy to move.
As a contemporary payment system, bitcoin could be used globally with security and speed.
John Browne from Euro Pacific Capital opines:
“the advent of crypto-currencies represents the increasing popular demand for a currency insulated from political debasement and bank profiteering. Crypto-currencies represent a legitimate attempt by private citizens to reassert their sovereignty over such government actions.”
No matter what the economists say about bitcoin, these attributes give bitcoin a healthy advantage.