The exponentially increasing popularity of cryptocurrencies, and especially Bitcoin has given rise to increased investor interest from around the globe. Many people have added Bitcoin to their investment portfolio, and believe that it can play the role of gold in their portfolio while giving way better returns.
The key similarities between gold and Bitcoin include their scarcity and the fact that both of them can act as an alternative to fiat currencies. However, there are still many stark differences between both of these assets.
Let’s discuss the key similarities and differences between Bitcoin and gold in this article.
Bitcoin Vs Gold: Similarities
Gold has always been considered as a safe haven for investors. Now, the same thing can be said about Bitcoin as well. Ever since its introduction, Bitcoin has proved itself to be an available and reliable investment.
Whenever financial markets around the globe start squeezing, investors start looking for ways to secure their money and invest it in assets that act as a hedge against inflation. In addition to gold, Bitcoin has become one of the most reliable hedges against inflation in every financial market around the globe.
The algorithm of Bitcoin is designed in a way that only 21 million Bitcoins can ever be mined. It is only a matter of time before the supply of Bitcoin ends, and Bitcoin becomes a scarce asset. This makes Bitcoin similar to gold in a way.
Moreover, gold also has a limited supply. However, it might not be running out as soon as Bitcoin. Gold mining is predicted to become financially unsustainable by the year 2050 because all of the “easy gold” is already extracted. This makes gold a limited asset as well.
Speculative investments are the ones that rely on the market price fluctuations of an asset for their profit. This is why risk is very high in these investments. As you might already know, Bitcoin is already very volatile and is known for its rapid price fluctuations.
Although gold is not as volatile as Bitcoin, it is still considered a speculative investment since investors buy and hold it in the hopes of gaining significant financial returns in the future when the gold price jumps.
Bitcoin Vs Gold: Differences
Gold is Safer
Since gold is a highly valuable asset, it is sold globally with a tight tracking system which makes it difficult to create fake gold, or even steal real gold. On the other hand, Bitcoin is created digitally and is secured by being listed in a public ledger visible to everyone.
Although Bitcoin itself is traceable, the applications it is traded through are susceptible to hacks. Cryptocurrency exchanges have been exposed to hacks and exploits in the recent past, and problems like these continue to bother the crypto market around the globe.
So, buying and holding gold is way safer and more secure as compared to Bitcoin or any other cryptocurrency.
Bitcoin as a Payment Network
Although other cryptocurrencies are being used for payments as well, Bitcoin has made significant improvements and is accepted by many businesses around the globe. It has developed into a suitable alternative to fiat currencies.
On the other hand, while gold ones used to be accepted as a form of payment, it is no longer in circulation in the form of gold coins. These days, gold is only being used for jewelry, and in a few other industries. So, while Bitcoin is being used as a mode of payment, gold is no longer used for buying everyday items.
Different Storage Methods
Large quantities of gold must be stored insecure walls and deposit boxes provided by banks around the globe. People usually pay banks for storing and securing their gold.
On the other hand, Bitcoins, being a digital asset, are stored in online cryptocurrency wallets and crypto exchanges. Bitcoin owners have a public and private key for easy transfer of value between different parties.