Bitcoin Vs. Gold

Sep 29, 2018 | Abundant Insight, Blog

Bitcoin has been called the digital gold of cryptocurrency and even though these two assets are very different and have a distinct history, they share the same authority in their own market. But which one is actually a better investment? Is the new and fresh Bitcoin outclass the most iconic store of value mankind has ever seen? In this article, we’ll compare both to see if there is a clear winner.


The Digital Edge

Bitcoin has proven itself to be the most stable cryptocurrency. Even though there’s been a lot of fear in the market lately, it has held the $6,000 support level brilliantly so far. Bitcoin is now considered as a legitimate digital store of value and institutional investors have came to the market and went onboard the crypto train. We see three main advantages that Bitcoin has over gold: its limited supply which is known by everybody at any given time, the speed and convenience of transactions and the ease of storage.

We know there will only be 21 million bitcoins in circulation and about 17 million have been created so far. However, we don’t know how much gold can still be found on Earth, under the sea or elsewhere. As we know, scarcity strongly impacts the value of an asset and knowing the quantity available makes it a lot more transparent for investors. Imagine that a huge amount of gold is all of a sudden found and dropped on the market. Price will go down dramatically as scarcity will be strongly reduced. This cannot happen with Bitcoin, there will be only that many coins and everybody knows about it.

The second advantage Bitcoin has over gold is the speed and convenience of transaction. To transfer some bitcoins from one wallet to another anywhere in the world, all you need is a device (phone, tablet, computer) connected to the internet. The transaction will likely take less than a few minutes and should cost you a few dollars at most. Now, imagine the procedure that needs to happen if you want to send gold from one safe to another, the amount of people and paperwork involved. This transaction will cost a lot and will likely take days if not weeks.

Last but not least, the way you store bitcoins is also much cheaper and much more convenient than gold. The most secure way to store cryptocurrency is to get a hardware wallet so that your private keys are stored offline. We recommend you to take a look at your Shop for the best hardware wallets available in the market. Once you’ve purchased it, you can simply transfer your digital assets in there and keep it somewhere safe at home. It doesn’t take any space at all and you can take it anywhere with you as most of them usually look like a usb flash drive. If you want to store gold safely, you need to get a serious safe either at home or at a storage space. Not only is this a lot more costly, it’s also a lot less convenient. Bitcoin definitely outclasses gold again, epecially if you’re planning to transact often.


The Trusty Old Stone

As we saw Bitcoin has quite a few advantages over gold but there are some elements where the new kid on the block cannot compete with its older rival.

The first and obvious one is trust. Gold has been a reliable store of value for thousands of years. It went through all the crashes of fiat currencies and remained a reference point at any given time. This confidence in the asset is still there today and from generation to generation, we are being told that gold and silver are the only real money that exists and an hedge againts fiat currency inflation. Therefore, there are new gold investors that comes in the market everyday with no sign of stopping so far. Gold’s market cap is around $7 trillion compared to Bitcoin’s $113 billion at the time of writing. This is an immense difference and the volatily of the digital asset, especially in 2018 has scared a lot of investors.

The second advantage that Gold has over Bitcoin is that it is not dependant of technology. Now, we said previously that digital transactions are far quicker and convenient than transporting precious metals but what happens if the system gets outdated or if quantum computers can crack the game? We’re certainly not qualified enough here to say that it will happen but it is a legitimate question that an investor can ask himself and in this case, gold seems to be a safer investment here.


The Bottom Line

As we saw here, both Bitcoin & Gold have their pros and cons. Bitcoin is much more geared towards the future because of its convenience and transparency but has yet to really infiltrate our daily lives. Gold on the other hand, remains one of the most trusted asset in the world and even though it’s a lot more of a hassle to store it and move it around, it has the history on its side. So in the end, there’s not really a winner here, at least at the moment. Take the time to research a lot about both asset and make a choice that you believe in and that feels good for you. At EZ Trading, we also believe that you shoud diversify your portfolio so investing in both might also not be a bad idea.