The Covid-19 epidemic taught us many lessons about several aspects of life. One of the most important was saving and investing. Those who made wise and prudent decisions were those whose lifestyles were abandoned in the difficult stages of quarantine without compromise. What we saw during the epidemic was that people were moving towards secure assets. Investing in gold has paid off well. But it has diminished the luster of the yellow metal, and digital currency has even helped. Today we talk about Bitcoin vs Gold and which one is better for investing.
Previously, the traditional move was to protect against stock fluctuations with gold. This has been a very effective method in the past, but a new alternative has emerged that challenges the old haven method.
What speaks in favor of gold?
- Gold is valuable as a material for consumer goods such as jewelry and is not found in abundance.
- Regardless of demand, supply is disproportionately low.
- Gold cannot be made. A company can issue new stock, the Fed can print dollar bills, but that is not the case with gold. It must be uprooted and processed.
What speaks in favor of Bitcoin?
- Bitcoin is a blockchain-based digital currency that shares some of its properties with gold. Many have called bitcoin “digital gold” in the past because of its weak relationship with other assets – especially stocks.
- Like gold, there is a limited amount of BTCs
Bitcoin vs Gold: Get some gold
Several factors make gold a powerful haven. It is valuable and rare as a material for consumer goods such as jewelry and electronics. Regardless of demand, supply is disproportionately low. Gold cannot be made like the issuance of new company stock or the printing of money by a federal bank. It must be uprooted and processed.
Accordingly, gold has almost nothing to do with assets such as currencies and stock indices such as the S&P 500. The precious metal was pegged to the dollar until 1971 when President Nixon severed ties between the US currency and gold as a base. Since then, those who do not want to move as much as possible in stock market fluctuations have invested in gold. This precious metal helps reduce shocks or even profits when the stock market corrects or shrinks by at least 10 percent.
Gold usually performs well during corrections because even if it does not necessarily increase, the asset that remains constant while others decrease is quite useful as a cover. In addition, as more people flee stocks and invest in gold, prices rise accordingly.
Bitcoin vs Gold: Bitcoin enters
As we said, Bitcoin is a blockchain-based cryptocurrency that shares some properties with its gold counterpart. Many have called bitcoin “digital gold” in the past because of its weak relationship with other assets – especially stocks. Market participants may recall in 2017 that the price of a bitcoin for the first time exceeded one ounce of gold. As of January 2020, the price of Bitcoin is over $ 8700, but how is it so valuable?
Like gold, there is a limited amount of bitcoin. Bitcoin co-creator Satoshi Nakamoto has a limited total supply of 21 million tokens. Bitcoin is also like gold because it is not issued by the central bank or the federal government. BTC, as a decentralized digital currency, is produced by the collective computing power of “miners,” individuals, and groups of people who work to validate transactions on the Bitcoin network, and they are rewarded for their time, computing power, and effort with Bitcoin. To ensure that the market is not flooded, the Bitcoin Protocol states that these bonuses will be halved periodically to ensure that the final bitcoin will not be issued until around 2140.
How gold protects you from inflation (in theory)
Gold has been used for decades by investors concerned about inflation and the erosion of the purchasing power of government currencies. The argument is that the scarcity and durability of gold make it a better store of value than paper money, which has an unlimited supply and depends on government support. In theory, the US dollar could move higher against the German Weimar or the Zimbabwean dollar in recent times if Washington continues to print more and more money.
But price charts show that gold is performing at its best during periods of high inflation. For example, gold futures declined in many of the 1970s, even as inflation rose, rising only in the last year or two of the decade.
The restrictions on gold as an inflation buffer are even more significant this year. Gold has fallen 11 percent as consumer prices rose sharply since 2008. In contrast, bitcoin bugs indicate a 20 percent increase in the value of this digital currency for 2021, even after the recent crash.
How Bitcoin protects you from inflation (in theory)
The architects of Bitcoin, in their 2008 white paper signed by Satoshi Nakamoto, clearly had the value of paper money in mind. One of the biggest differences between bitcoins and regular currencies was the decision to limit the number of bitcoins that could make up to 21 million.
The designers promised that strict restrictions on the supply of bitcoin would make it “completely inflation-free.” Digital currency with about 19 million bitcoins is still scarce. Zack Killermann, author and publisher of financial technology site Finder.com, said this was because of the “reduced rewards” offered to miners. Like gold, mining new bitcoins becomes more difficult over time, and miners have to work twice as hard for each bitcoin after each four-year cycle.
“No government can make more gold, and no government can make more bitcoin,” said Weiss, CEO of CoinFlip. Bitcoin enthusiasts also point to the benefits of digital bitcoin mode, the hassle and cost savings associated with storage, access, and security associated with gold.
Bitcoin vs Gold
For hundreds of years, gold has dominated safe havens, while bitcoin was launched more than a decade ago and has only been recognized in the last few years. Below, we will compare these two investment options:
1. Transparency, safety, legality
The system created is gold for trading, weighing, and tracking pristine. It is very difficult to steal it, destroy counterfeit gold, or otherwise corrupt the metal. Thanks to its decentralized encryption system and sophisticated algorithms, bitcoin corruption is also difficult. But there is still no infrastructure to ensure its security. The Mt. Gox is a good example of why bitcoin traders need to be cautious. In this devastating event, a popular offline exchange was lost and about $ 460 million worth of user bitcoins were lost. Years later, the legal consequences of Mount Gox are still being resolved. Legally, there are few consequences for such behavior, as it is difficult to track bitcoin vs gold at any level of performance.
Both gold and bitcoin are scarce resources. Halving the bitcoin mining bonus guarantees that all 21 million bitcoins will be in circulation by 2140. While we know there are only 21 million bitcoins, it is unclear when all of the world’s gold will be mined. There is also speculation that gold could be mined from asteroids, and some companies are even looking to do so in the future.
3. Base value
Gold has historically been used in many applications. From luxury items such as jewelry to specialized applications in dentistry, electronics, and more. In addition to creating a new focus on Blockchain technology, bitcoin itself has tremendous base value. Billions of people around the world do not have access to banking infrastructure and traditional financial instruments such as credit. One of the advantages of Bitcoin is that people can send their value worldwide at almost no cost. The real potential of Bitcoin as a banking tool for those who do not have access to traditional banks may not yet be fully developed.
Both gold and bitcoin have very volatile markets with which to trade Fiat money. But Bitcoin vs gold has the more safe market.
One of the main concerns of investors who view Bitcoin as a safe asset is its volatility. For evidence, just look at the history of bitcoin prices over the past two years. Bitcoin peaked at around $ 20,000 per coin in early 2018. About a year later, the price of a bitcoin was about $ 4,000. Since then, it has offset some of these losses, but it is not close to a one-time high.
In addition to the general fluctuations, Bitcoin historically proves to expose to the weather and market cravings and news. Especially since the boom in digital currencies led to several digital currencies reaching unprecedented prices in late 2017, digital currency news could prompt investors to make quick decisions and push the price of bitcoin to Speed up or down. These fluctuations are not inherent in gold for the reasons mentioned above and may make it a safer asset.
In recent years, several alternative digital currencies launched that aim to stabilize Bitcoin more. Tether, for example, is one of these so-called “stablecoins”. Tether, like gold before the 1970s, is pegged to the US dollar. Investors looking for less volatility than bitcoin may want to look for safe havens elsewhere in the digital currency space.
6. The US tax rate is more favorable for Bitcoin
Gold and Bitcoin US long-term tax rates (on investments bought and sold over a year) are different. For short-term capital gains, both have tax at the rate of personal income tax. Bitcoin has tax at long-term capital gains of 0 to 20 percent, depending on the level of revenue. Gold has tax as a collectible commodity and therefore has a long-term interest rate of 28%, regardless of investor income.
7. The average exchange advantage goes to bitcoin
Bitcoin is superior to gold as a medium of exchange or payment method. Unlike gold, bitcoin vs gold is a fixed unit of account and is easily divisible and transferable. Gold is not easily distributed on-site, and there are potential problems with purity and validation. The ability to track bitcoin in Blockchain technology is likely to be a significant advantage, especially in cross-border transactions.
sellers and retailers accepted digital currencies as a form of payment. Many people in the crypto community make money with cryptocurrencies such as bitcoin. In addition, a growing number of professional athletes and others have registered for services that automatically convert revenue into digital currencies by paying Fiat.
Bitcoin vs Gold: Conclusion
Gold was the world’s reserve currency until 1971 when Nixon freed the US dollar from gold and other major national currencies were pegged to the dollar.
Gold retains its value for a long time and its value has recently increased. However, the safe storage of the precious metal is difficult and not easily separable.
Bitcoin Savior is a fraudulent, corrupt, and collapsing financial system that offers a censored global currency with borderless payments and transactions.
The value of the BTC digital currency has been steadily rising since its inception in 2009. It is becoming an investment tool and a desirable trading option. Bitcoin is a digitally rare inflation-reducing asset that is immutable and transparent. Bitcoin has a limited supply and nobody cannot spoil it.