Could Bitcoin Potentially Replace Gold?

Can Bitcoin replace Gold?

The comparison between Gold and Bitcoin has now been done for quite a long time by market observers. The primary basis for this comparison is the fact that both of these assets hold a large value. Both can be considered as speculative investments, which require due diligence by the investors for them to benefit. However, key differences such as the very nature of these assets, that is, Bitcoin being digital and gold being tangible, has led to many economic activists predict that Bitcoin could possibly replace gold. It is important to note that the relation between gold and Bitcoin values has been fairly inverse. However, the existence of any causation is fairly subjective.

Bitcoin and Gold – More related than we think

The most significant line of parallelism that can be drawn between the two is the fact that both Bitcoin and Gold are safe-haven investments and can fetch large amounts of profits if invested smartly. Gold is a precious metal extracted by mining and its value is decided by the supply and demand. Much like gold, Bitcoin is also mined and the more it is mined the harder the process becomes and the value is decided by the supply and demand. The mining of gold, however, is a physical process.

It is interesting to note that the prices of gold and Bitcoin have been in an inverse relation since a long time now. However, it is worth noting that the inverse relationship does not imply that the two are interrelated. The fluctuation in Bitcoin value depends on factors such as the volume of transactions while Gold’s price changes with other factors such as interest rates and so on. That being said, the inverse relation does attract attention and increase in the value of Gold could mean a bearish trend of Bitcoin.

Where Bitcoin beats Gold

Firstly, the fact Bitcoin is based on a digital platform which allows the currency to be sent across at the speed of information, without the requirement of any intermediary, and is convenient. This directly supersedes the physical nature of Gold. In an era where digitization is thriving, Bitcoin can certainly get an edge over the tangible currencies. Bitcoin fills the criterion of being durable to any threats of hacking, has a unique identity which makes it verifiable and most importantly is far more portable than gold. Scarcity also makes it a great store of value.

Probably the most important line of distinction between the two is the fact that Bitcoin is decentralized while Gold’s sustainability as a commodity is subject to the fragility in the economic sector. This means that the possession of Bitcoin is absolute. On the other hand, Gold’s acquisition is not always absolute, which means that one might own something on paper, but it might not necessarily mean that they have it in their hands. Apart from this, the process of Bitcoin mining, unlike Gold, is a virtual one. This means that the amount of bitcoin being mined is a piece of open-source information.

Moreover, the availability of information is more in the case of Bitcoin. A person can always obtain information regarding how much bitcoins have been mined and the maximum supply can also be known, which stands at 21 million bitcoins. However the volume and abundance/ scarcity of gold is not known. This makes its value subject to drastic changes in the future.

The Perfect time

Bitcoin, of late, has had a major role in revolutionizing the global economy. Its store of value feature has attracted various investors which has been greatly facilitated by the ever digitizing world. Therefore, this becomes the perfect time when Bitcoin can be utilized on a larger scale. It has the potential to disrupt and enter the markets with the most value. A shift from traditional and conventional currency towards digital currency could potentially take place on a larger scale.

The investments of the current generation are more inclined towards digital currencies. A recent survey conducted by Bitcoin Survey Fall stated that about 30% of all millenials would rather invest their money in USD 1000 worth of Bitcoin than USD 1000 worth of government bonds. The progression of generations is increasing the role of Bitcoin in people’s lives. An apt example for the widespread adoption and spread of cryptocurrency is seen by the fact that over one hundred thousand shopkeepers have started accepting Bitcoin as a form of currency.

Maybe all of this seems too ambitious, but the fact that Bitcoin replacing one of the most prevalent safe haven asset seems less fictitious and more realistic is an indicator of its widespread adoption and the role it could possibly play in the global economy.


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