The statement, “Bitcoin is digital gold,” is something that we hear a lot everywhere “safe haven” assets are mentioned. In this article, we look at both assets and look at the similarities between bitcoin and gold.
Why the narrative?
Globally, traditional currencies have still not recovered from the recession in 2008. What’s more, there might be another recession ahead due to the pandemic experienced in 2020.
For most people looking to make more money or save some cash, investing in assets is the ultimate option. Assets like stock rely heavily on the success of global economies (especially economies where the companies originate).
Unlike stocks, gold and bitcoin are classified as safe-haven assets that could offer investors better protection against inflation and challenging economic periods.
Generally, gold and bitcoin are believed to be negatively correlated to the general markets. This makes them a good option for investors looking to maintain value, make profits, or limit their loss.
Due to its precious and “scarce” nature, gold has always been considered a good investment. This classification has proven to be true. Gold has performed continuously better than traditional currencies in the past.
On the other hand, bitcoin is a relatively new asset that others are tipping to be the best safe asset. Launched in 2009, bitcoin has also outperformed other assets and has gained popularity among investors.
Here is a deeper dive into what both of them are and a comparison of both platforms.
Gold and Bitcoin as an investment
As mentioned earlier, both have proven to be safe-haven assets that attract investors. Unlike traditional currencies, bonds, and stocks, governments, firms, or individuals cannot print infinite amounts of bitcoin or gold.
Gold is a precious metal available in limited quantities. Further, the process of obtaining gold is not easy and requires a lot of capital and work.
On the other hand, bitcoin has a total supply cap of 21 million. The supply cap means that only 21 million bitcoin will ever be in existence. Generating new bitcoin can only be done through mining (a technical term for contributing to the network’s strength by confirming transactions). The bitcoin mining industry has also become very competitive and resource-intensive.
What’s more, bitcoin has several other use cases. The blockchain technology-based currency allows people to transfer value in a peer-to-peer manner.
Both gold and bitcoin maintain a low supply while demand surges. This has led to the rise in the value of both assets so far.
Gold and Bitcoin compared.
Now that we know why both of them are seen as viable investment options, let’s compare some of their important features.
Value
Both assets have value. Bitcoin is a proven valuable asset. It features a decentralized payment system and is the foundation of an entirely new asset class – cryptocurrencies.
Blockchain, the technology created through Bitcoin’s invention, is being used outside the financial world to make systems more advanced.
What’s more, transactions done with bitcoin cost less, adoption of bitcoin as a payment method by businesses, and bitcoin’s evolution as a highly sort after asset gives it value.
Gold, on the other hand, has several use cases as a precious metal. It’s use cases, coupled with the lack of high supply, give it value. Gold is in demand for the creation of luxury items and technology units.
Scarcity
Scarcity is one of the most important reasons for the negative correlation with traditional markets. Both assets are scarce.
Bitcoin is definitely scarce, with a finite supply of 21 million. This supply cap is written in its code that prevents the network from printing new coins from thin air.
Gold is scarce. However, it is hard to say precisely how scarce gold is and will continue to be since there could be several unidentified gold resources out there.
Assecibility
Finally, we look at how accessible both assets are to new investors.
New investors can access bitcoin easily compared to gold. New investors can opt for traditional brokerages to acquire bitcoin or use more straightforward methods like P2P marketplaces.
There are different ways for investors to purchase their first bitcoin, like Bitcoin ATMs and crypto exchanges like Paxful.
Getting access to gold for the first time can be hectic. Investors have to use brokerage services to purchase gold.
Applying for a brokerage account takes time and high fees involved in using brokerages.
Where can I trade Gold for Bitcoin?
There are several ways to trade gold for bitcoin. One of the easiest ways to do this is through peer-to-peer marketplaces like Paxful.
Paxful allows you to sell gold for bitcoin. P2P exchanges enable you to set your own price and access more traders from different regions and come with lesser trading-fees.
To get started, create an account, verify your identity, and create an offer to sell your gold for bitcoin.
Interested traders will see your offer and request to trade with you.
In conclusion, both assets provide a great escape from traditional methods of investment. The final decision is in your hands on whether to go with bitcoin or gold. Also, some investors prefer to diversify by holding both assets.
The post Is Bitcoin digital gold? appeared first on BlockNewsAfrica.
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