A store of value is an asset that will retain or even outstrip the prevailing inflation rate. However, cash has become worthless during periods of high levels of inflation. When prices rise, cash value drops quickly. People count on different assets like bonds, gold, stocks, and real estate to beat inflation.
It is therefore necessary to have an unchangeable asset due to these results. Gold has served as the only medium of exchange for thousands of years as investors believe that their wealth will not devalue with time. Historically, gold has remained one of the safe havens during troubled times. This is because gold is a finite and scarce asset. These traits help many money systems last long. Moreover, the supply of gold is steady, consistent, and known. Therefore, gold usually does not follow the same trends as other investments like property and shares.
Most governments and individual investors recognize gold as a store of value. Throughout history, many nations have adopted the gold monetary standard. The “gold standard” refers to a monetary policy where the value of the paper currency is backed up by gold held by governments. The scarcity of oil has seen it become a value store.
In this digital age, another asset has emerged as a store of wealth, Bitcoin. This blog will compare Bitcoin and Gold to see which asset class is a better store of value.
Bitcoin has become an impressive rival to gold as a commodity with value kept in the digital sphere. Their rarities, durability coupled with portability resemble those of gold, but their decentralization coupled with worldwide access gives them an edge over gold. The potential of Bitcoin to revolutionize the finance sector cannot be ignored, while more and more people view Bitcoin as digital gold.
Bitcoin as digital gold
According to a 2022 Goldman Sachs analysis, as digital assets become more broadly used, Bitcoin could create a dent in gold’s market share. Based on the estimates by Goldman Sachs, Bitcoin occupies about 20 percent of the “store of value” market, valued at over $700 billion. more than $2.6 trillion in gold held for investment purposes. There are numerous financial specialists who believe that Bitcoin will be the strongest of asset classes in the years ahead.
Bitcoin, in comparison to gold, is an additional choice for investors. It offers diverse uses and can yield good returns if properly used. Concerns include its unstable nature and limited functionality as a trade medium. But, as a fresh and disruptive technology, it has shown promise as a reserve of value. Bitcoin is an appealing alternative to traditional assets due to its decentralized nature, digital scarcity, and worldwide accessibility.
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Comparing Bitcoin and Gold
Durability
Bitcoin doesn’t physically degrade, which is because it’s digital. It’ll always exist as long as its supporting blockchain network is functional.
Portability
Bitcoin is easily portable as it is digital in nature, unlike other physical assets like Gold.
Fungibility
Bitcoin is fungible like Gold. Which means that each Bitcoin is the same as the other? Bitcoin can also be divisible into smaller units. The smallest unit of Bitcoin is known as a Satoshi.
Limited Supply
Bitcoin’s supply is capped at 21 million making it one of the most deflationary assets known.
Verifiability
Transactions of the Bitcoin blockchain are publicly verifiable and trackable. Which makes the blockchain highly transparent and resilient to manipulation?
Liquidity
Bitcoin can be traded on several platforms and the ease of trading Bitcoin makes the asset highly liquid.
Conclusion
So, what’s the best choice for keeping value? It’s linked to your investment approach, willingness to take risks, and available funds. Currently, Bitcoin is quite volatile compared with gold, thus being slightly more dangerous. However, Bitcoin is indeed comparable to gold in terms of economics because they possess similar characteristics like the finiteness and limited nature of both commodities.
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Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Each investor must do his/her own research or seek independent advice if necessary before initiating any transactions in crypto products and NFTs. The views, thoughts, and opinions expressed in the article belong solely to the author, and not to ZebPay the author’s employer, or other groups or individuals. However, ZebPay and investors will not be liable for any of the acts, omissions, and losses incurred by any of the investors. No payment has been made in cash or in kind by ZebPay for the above article. The article has been furnished without any warranty of its completeness, correctness, and timeliness, and of the utility of this information. Bitcoin as Digital Gold: Comparing Store of Value Assets
