Bitcoin vs. Gold

There has been increased discussion about the benefits of bitcoin vs. gold since bitcoin has arisen as a store of value in recent years. Bitcoin and gold are both investments that are here to stay in the long run, though each with advantages and disadvantages.

The Advantages of Bitcoin

Bitcoin is the original cryptocurrency. As a cryptocurrency and digital form of money, bitcoin is generated and traded using encryption techniques to prevent theft and promote anonymity, though with limits. Bitcoin transactions are posted on a public ledger known as a “blockchain.” As the first cryptocurrency, it is the most well-established and well-known of hundreds that have since been developed. Bitcoin has a “first mover” advantage and has become a recognizable brand.

Among the advantages of bitcoin over fiat currencies and gold are that it does not require physical space to store, is limited in quantity to a maximum of 21 million units, and is decentralized, allowing users to trade units of bitcoin independent of central bank policies and desires. It is a competitor to traditional forms of money. It can also be used to facilitate transactions online, as an established digital currency. Potentially, the transaction fees of bitcoin are much lower than traditional credit cards and payment processors.

Gold Buddha statue.

The Advantages of Gold

Gold is universally recognized as money due to its unique properties: it is rare, durable, divisible, and malleable. It is a precious metal with a bright yellow luster. It has been used for thousands of years to make jewelry and mint coins, and due to its scarcity countless wars have been fought to obtain it. Gold is also used in industry as a conductive metal, especially for electronics.

Unlike bitcoin and paper money, gold has intrinsic value. Gold is a physical form of money that you can hold in front of you, and though it requires space to store in significant quantities, this is not usually a problem given its high value as compared to silver, which requires significantly more space. Unlike bitcoin, gold cannot be stolen via hacking. Similar to bitcoin, gold can be used as a hedge to the risks inherent with fiat money, which can be printed infinitely. The supply of gold increases steadily at one to two percent annually, preventing spikes of inflation in the price of the precious metal.

Because gold has intrinsic value, it will always be recognized as money universally. No matter where in the world you are, gold can be liquidated for cash or other goods. Though bitcoin is likely to remain the “gold standard” of digital currency as the first major one, there is a risk of a superior, more technologically advanced digital currency taking its place and potentially rendering it obsolete or with significantly reduced value.

However, because gold is a metal of very high value, it is not as good of a medium of exchange in a modern, complex society. Though it is no longer practical to make gold for day to day transactions, gold nonetheless remains an excellent store of value for savers.

Why Bitcoin and Gold Are Good Investments

While gold has a long history as money and will remain a precious metal, the future is digital. Bitcoin represents the evolution of money from tangible (metal or paper) to intangible. Though bitcoin can be replaced with a superior technology, the likelihood of that as of this time appears very slim. Moreover, software developers will continue to make enhancements to bitcoin to maintain its position as the digital currency with the largest market capitalization. As both forms of money can be used to hedge against the uncertainties within fiat currency markets, investors should seriously consider accumulating both forms of money.