Is Bitcoin the New Digital Gold Equivalent?
Bitcoin is the most widely used and accepted cryptocurrency in the world. With a market capitalization of circa $440 billion, just up slightly by $100 billion from the past few months. And as such, one of the biggest questions asked about Bitcoin all over the world is whether it will continue to grow in value, or crash due to a lack of confidence from investors.
Typically, the total market value of crypto-currencies is standing at more than $1trillion, making them too important to ignore. Most investors often wonder, “Is it really comparable?” when comparing a new asset class to a classic one. Let’s examine a few features of bitcoin and gold since many people want to know how they compare to one another.
Bitcoin vs Gold: A Comparison
The biggest difference between bitcoin and gold is that bitcoin is a digital currency while gold is a physical commodity. The fact that bitcoin exists only in cyberspace has made it easier for people to buy and sell it in large quantities without being noticed by regulators or governments. Bitcoin transactions are recorded on an immutable public ledger known as the blockchain, making it easy for anyone to see how much was transacted but not who actually owns any particular quantity. This makes it possible for people in countries where digital currencies are banned from doing so anyway. Because bitcoins exist only electronically, there is no concern about counterfeiting them as there would be with traditional currency printed by governments. By contrast, gold can be used directly as currency if necessary.
Gold is a precious metal that has been used as money for thousands of years. It’s valuable because it is rare, durable and fungible. Gold was first used by ancient civilizations as money because it was scarce and easily transportable. It also has an intrinsic value due to its physical properties like being malleable, ductile and chemically inert. In spite of all these, as a result of concerns about inflation, investors like JP Morgan are once again interested in using bitcoin as a hedge against inflation. Bitcoin is similar to gold in that it is also scarce, durable and also fungible.
Common Questions Asked About Bitcoin
- Why can’t I use Bitcoins to buy food or clothes?
- How Bitcoin is different from the Dollar, Great Britain Pound and Euro?
- Why do many people see Bitcoin as a hedge against inflation?
- If you don’t consider bitcoin to be a means of payment, does it then have the characteristics of a safe haven asset? Could it be digital gold?
- What are the differences between Bitcoin and Ethereum?
- What are the main drawbacks of crypto-currencies?
- In five years, could there be another crypto-currency that has surpassed Bitcoin and Ethereum in terms of value?
- What are the differences between central bank digital currencies (CBDCs) and cryptocurrencies?
- Will Central Bank Digital Currencies replace cash and/or cryptos?
As a financial hedge for the longest time, gold will continue to be gold; bitcoin will continue to be a speculative investment. Let’s not lose sight of the fact that cryptocurrencies are a relatively new means of transacting in the global economy in a private, secure, and liberating manner.
Image Source: Adobe Stock
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
DNACrypto Team
Cryptocurrency & Blockchain Experts
