Bitcoin Vs Gold Debate Rages As BTC Hits A Year High

August 19, 2020

As more people come to the realisation that Bitcoin is a legitimate store of value, the price continues to grow. However, this unprecedented year keeps raising a familiar question: Bitcoin or Gold?

Bitcoin Price Peak

Bitcoin closed the day on Monday, August 17, 2020 at a price of $12,254 USD. This was a 3.01% increase in 24 hours of $358, not to mention the highest closing price in over a year. The value is keeping its head above the $12k USD barrier for now but is still 38% lower than its all-time high of $20,089 from December 17, 2017.

 

Gold Soaring

Gold is trying to find firm footing and sustain its $2,000 per ounce price level following a correction (triggered when the asset hit an all-time high of 2074.88 this month). While both alternative assets are skyrocketing as the dollar continues to dip, investors and would-be experts can’t seem to agree where people should put their money.

Bitcoin vs Gold

Why the debate? Well, in times of economic uncertainty, investors foresee a dip in the price of fiat currencies and put their money into safe haven assets to protect their wealth. This is partly why Bitcoin was created in the first place – to protect the value of people’s money so that it couldn’t be devalued by governmental inflation.

Gold was always looked at as a safe haven asset, but Bitcoin is quickly taking up the mantle of “digital gold,” which is why the two are now constantly compared.

 

Bitcoin’s Supply Is Finite, Gold’s Is Not

One of the biggest differences between Bitcoin and gold comes down to their supply. There will only ever be 21 million bitcoin in existence and it will take until the year 2140 for the last coin to enter circulation. Both of those facts have been true since the Bitcoin blockchain launched in January 2009.

Consider that nobody can tell you how much gold there is on the planet with accuracy down to the 12th decimal place (the number of decimal places Bitcoin goes to).

There is also a chance that Tesla founder Elon Musk figures out how to mine gold off of asteroids shooting through space. If he does that, gold could drop significantly in value, because we will have access to way more than we need. Remember, this idea is coming from a guy that is revolutionizing the future of automobiles and wants us to move to Mars. He also knows how to bring rockets back to earth without destroying them.

Bitcoin may not always be in high demand, but the supply is finite. The same can’t be said for bars of gold.

Taking Sides

In a broad sense, JP Morgan has reported that younger investors generally put their faith in Bitcoin, while the older generations favour gold.

“The two cohorts show divergence in their preference for ‘alternative’ currencies. The older cohorts prefer gold while the younger cohorts prefer bitcoin.”

– JP Morgan analysts led by Nikolaos Panigirtzoglou wrote in August.

“The simultaneous flow support has caused a change in the correlation pattern between bitcoin and other asset classes, with a more positive correlation between bitcoin and gold but also between bitcoin and the dollar as U.S. millennials see bitcoin as an ‘alternative’ to the dollar.” 

The Winklevoss Twins, huge Bitcoin proponents, have stated that the price of gold isn’t fixed due to the amount of it floating out in space. In their opinion, there’s a financial incentive for Elon Musk’s SpaceX to use their technology in mining billions of dollars’ worth of gold from asteroids, therefore devaluing its worth.

Mike Novogratz and Dave Portnoy have also come down on the side of Bitcoin. As Bloomberg states, the two investors differ in investment background, experience and viewpoint, but agree: buy Bitcoin. Novogratz considers Bitcoin “harder to buy” than gold, putting his money where his mouth is with 25% of his personal wealth tied up in the asset. Portnoy was apparently swayed by the Winklevoss’ comments on the future of gold vs bitcoin.

More Bullish Case for Bitcoin as a Better Store of Value Than Gold

Since Netcoins is a cryptocurrency exchange and you’re a Progressive Investor who is investing in cryptocurrencies (or about to do so), let’s start with deconstructing the bullish argument for Bitcoin being a better store of value than gold.

Digital Currency Is Civilization’s Logical Next Step in Communicating Value

At the time of this writing, the estimated market capitalization of gold is $13.84 trillion Canadian. In comparison, Bitcoin’s market capitalization is currently $1.20 trillion Canadian. That means Bitcoin’s value will need to outpace gold by more than tenfold for the cryptocurrency to be worth more than gold. Some experts believe that’s exactly what will happen by 2030.

That belief points largely to the idea of digital currencies being the next evolution of money. Those who see the light would ask you to consider how communicating value has evolved:

• In the days of the caveman, humans kept track of value using sticks and stones to create man-made ledgers.
• Later civilizations began to realize they could barter and trade goods for one another. In other words, help me hunt an animal and I’ll let you keep the ax.
• In 1100 BC, China began trading weapons for one another, but they made the edges of the weapons circular so that people didn’t injure themselves while making exchanges.
• 600 years later (500 BC), the first official currency made from precious metals was minted in a small country in Asia then called Lydia.
• In 1200 A.D., China starts using paper money. Europe wouldn’t follow suit on that until 400 years later.
• Fast-forward to 1955. The credit card is invented.
• Fast-forward one more time to 2008. The Bitcoin whitepaper is published.

It’s taken hundreds of years to get to this point. If digital currencies built on public blockchains are the future of value communication, there’s no reason not to think that Bitcoin won’t be more valuable than gold in a decade or less.

Bitcoin and Cryptocurrencies Have Reached the Point of No Return

The world has already reached the point of living in a cashless society. Many of us are paying for things without even pulling plastic out of our wallets because smartphones can store credit card data now.

The bullish argument here is bigger than that though. It points to the fact that central banks and governments are launching national digital currencies. Like Bitcoin, these digital currencies will live on blockchains. But unlike Bitcoin, those blockchains will not be truly public, trustless, or democratic.

The only thing central bank and government digital currencies will do is further blur the lines between themselves and Bitcoin. The transition will make it easier for those late to the crypto party to accept the idea of exchanging value on a blockchain. Once they realize Bitcoin is fundamentally different from government-backed digital currencies, those latecomers will make the switch once and for all.

Add that to the fact that publicly traded companies (like Tesla) are starting to trade in their cash reserves for Bitcoin, Ethereum, and other cryptocurrencies, and it’s obvious that our society is reaching a point of no return.

The Assets Are Now Linked

While many debate over one or the other, investors are now saying gold’s success will indirectly boost the price of Bitcoin, possibly to $50,000. This comes after Warren Buffet made a huge move to pull money out of banking and put it into a gold firm (not the asset itself).

Buffet’s firm, Berkshire Hathaway, sold a huge portion of its shares in JPMorgan Chase, Wells Fargo and PNG. Buffet purchased a single stock in Barrick Gold, a Canadian mining company. This move out of banking and into gold suggests a lack of faith in banks as a long-term investment. Avid Bitcoiner Max Keiser claims that such a titan moving into gold will correlate to a similar move into Bitcoin, buoying the price to $50,000. While this seems a little on the optimistic side, it worth considering.

As we reported recently, more and more big players are entering the crypto space, and buying Bitcoin. This is a sure sign of continued legitimacy and adoption of the digital asset as a store of value – a camp we’ve been keeping warm for quite a while.

For more blogs on all things Bitcoin, you can read more here. 

How and Why You Should Use Bitcoin to Store Your Value

The best way to store your value within cryptocurrencies is to buy Bitcoin with Netcoins. Whether you prefer to do business with a cryptocurrency exchange in Toronto or a cryptocurrency exchange in Vancouver, it doesn’t matter. If you’re Canadian, you can sign up for a free account with Netcoins and get your hands on Bitcoin, Ethereum, Litecoin, and QCAD (Canada’s first stablecoin).

As for why you should use Bitcoin as a store of value?

Even if you’re not sure which side of the store of value argument you sit on, buying Bitcoin is a great way to diversify your portfolio. It’s the most proven asset in the cryptocurrency asset class and it’s the entry-level cryptocurrency that most new crypto investors familiarize themselves with first.

It’s up to you to decide whether you value the upside of Bitcoin over precious metals or the historic track record of gold over the once mysterious cryptocurrency that is now mainstream.

Making the best choice for yourself is what being a Progressive Investor is all about!

It’s easy to buy bitcoin with Netcoins. Check out bitcoin prices, more info about the coin and how to get started in 3 simple steps.