Bitcoin and gold offer a wide range of benefits to portfolios, but which is the best? With central banks around the world appearing to have demeaning competition over their currencies and as inflation looms, it may be time to revisit those inflation hedging strategies.
Of course, the hot topic is: buy Bitcoins or gold, what is the best hedge against inflation? We have collected several traits and compared the two assets. Here’s what we found:
Gold has been a reliable store of value for millennia, while Bitcoin is a disruptive new technology and despite its short existence, it has faced and endured its trials and tribulations and is still standing, making it clear that it is here to stay.
And the longer Bitcoin stays, the higher the public confidence levels will be.
Having an unlimited supply is not related to being a good store of value. By design, the supply of Bitcoin is limited to 21 million. Gold has always been in short supply throughout history, but it has certainly seen increases in its supply as well.
Gold has intrinsic value as a commodity as there is a demand for gold in several sectors, outside of its basic money functions. Bitcoin, on the other hand, no.
Furthermore, if people for lack of trust do not accept it for its monetary functions, Bitcoin will simply have no value.
However, not having intrinsic value can also be a positive trait as if it has no other function, it is not subject to supply shock either.
For an object to be fungible, it must be able to be replaced by another exactly the same. As such, trading one gold bar for another could be considered easier than trading Bitcoin since, despite having the same value, Bitcoin’s traceability on the blockchain could make some not as fungible as they can be linked to illicit exchanges. and therefore not be accepted by merchants.
Gold, however, retains its value and even though it is centuries old, it can still be responsible in our day. That said, there are very encouraging signs that the Bitcoin network will work to improve both its privacy and anonymity, as well as its users.
Despite showing clear signs of durability, it is still too early to comment on Bitcoin as many believe the network is still in its infancy and regulatory actions or hackers may be trying to block it. Gold, on the other hand, has been around for many centuries and has been able to maintain its position as a valuable asset and store of value ever since.
Although gold may be divisible by weight, unlike Bitcoin’s proposal, gold can hardly serve the purpose of being a medium of exchange in society.
Comparing these two in this field, we confirm the obvious. While the transportation of gold is risky, time-consuming and a very difficult endeavor to go through, Bitcoin can process transactions around the world at lightning speed.
The authenticity of gold is easily verifiable. Bitcoin’s authenticity is verified by cryptographic signatures, mathematical formulas, and a decentralized network, all of which work in unison.
Confiscation and resistance to censorship
Bitcoin is decentralized and distributed in a peer-to-peer network, which makes it very resistant to censorship, while the physical properties of gold can make it both difficult in terms of mobility and susceptible to being regulated.
As for confiscation, there have been laws that have made the ownership of gold illegal. Furthermore, during the transport of the gold, there could be risks of confiscation depending on the value transported. Bitcoin is less prone to confiscation.
We are inclined to say that Bitcoin outperforms gold in many of these categories, but not all.
Some might say that Bitcoin is arguably the hardest form of money ever created, while others say it is prone to risk as it is still a nascent technology.
But even as gold has proven itself as money for millennia, standing the test of time and earning its trusted status, Bitcoin’s incredible potential makes us think it might be worth considering having both of them in our wallets.