Bitcoin vs Gold

  • Bitcoin is often called a digital gold
  • Bitcoin is similar to gold – it is also scarce and limited
  • Bitcoin can be relatively stable and even more profitable
  • Bitcoin and gold coexist in investment portfolios and are often used to diversify assets

Bitcoin Compared To Gold – Explained Simply

Bitcoin is often referred to as digital gold, but how can you compare precious metal and cryptocurrency?

At first glance, there can be nothing in common between gold and Bitcoin, because you cannot put precious metal and lines of program code in the same row. But if you look at both assets from the point of view of investment attractiveness, then two important similarities are noticeable.

First, gold reserves and Bitcoin supply are limited. There will never be more gold than existing natural reserves, and Bitcoin is limited to 21 million coins. Secondly, both assets have approximately the same value in different countries of the world.

The main difference is price stability. If gold rises in price extremely slowly and you need to invest in it in order to increase your capital with an eye on at least 3-5 years, and better much more than Bitcoin is a high-risk asset, its value can increase by 30, 50 and even 100 percent within a few months and then collapse just as quickly.

Inflation – BTC Wins

gold and bitcoinSpeaking about the general definition of the concept of “inflation”, this name was given to the process of growth in the cost of goods and services over a certain period of time. Along with this, wages do not particularly increase, which reduces the purchasing power of the currency unit, the price of which is growing. With regard to the concept of “cryptocurrency inflation”, some market participants are of the opinion that it is fair to compare the classic rise in prices for goods in fiat currency with the increase in the volume of cryptographic currency in circulation.

Even Bitcoin considered the most de-inflationary digital currency, suffers from inflation. This is clearly demonstrated in 2018 when the purchasing power of BTC decreased by half.

Bitcoin is often called a kind of haven from economic instability. Crypto fans enthusiastically advertise digital assets as a method to resist global inflation and the depreciation of national currencies. In this case, it is worth thinking about which cryptocurrency to choose to preserve your assets. Elementary analytics have shown that, unfortunately, none of them is able to save from the depreciation of the national currency.

The reason for this is the arbitrary inflation of supply and demand. Considering the average indicators for the year, we can talk about the futility of fighting inflation with the help of cryptocurrency. Some crypto inflation is always present.

If we compare Bitcoin and gold BTC is limited, gold is too but not as much. In this aspect of our comparison, BTC wins by a slight margin.

Usability – Gold Wins

Gold isn’t just “money”, it’s also a key component in many electronics. When we compare BTC and gold in terms of usability the latter has a massive advantage. The world’s largest cryptocurrency cannot be used “physically”, while gold is a part of a lot of items. We can possibly provide an example of watches, jewelry, where gold is used actively to create these items. Yes, you can purchase a lot of things for Bitcoin and numerous companies are gradually adopting crypto as payment but it comes nowhere close to gold when it comes to usability.

Gold is widely used in industry, the demand for it is several hundred tons per year. It is most commonly used in the electronics and dentistry industries, as well as in the chemical industry. GFMS (Gold Fields Mineral Services) experts have calculated that all industrial products manufactured by mankind contain about 18 thousand tons of gold. The main consumer of gold is the electronics industry, using it in electronic components for computers and mobile phones.

In the future, gold consumption by the electronics sector will increase due to the growth of the electronic components industry in East Asia and the PRC. A significant amount of gold is used in dentistry as crowns and dentures. In the chemical industry, gold is used for the manufacture of corrosion-resistant parts of chemical devices and as a catalyst.

The rest of the industrial use of gold belongs to numerous types of household consumption: the application of protective coatings, gilding of watch cases, the manufacture of fabrics with gold threads, the creation of special types of glass, etc.

The leaders in the technical use of gold are the United States, Japan, and Germany. In these countries, gold is used in high-precision electronic, space, and instrument-making technologies. For example, in the manufacture of parts and assemblies for jet engines, nuclear reactors, spacecraft, etc.

Liquidity – Gold Wins

btc vs goldIt’s easier to sell gold than BTC. Compared to securities and even money, gold is a tangible asset that does not depend on whether a government or a company meets its payment obligations. This is what allows it to act as a reliable “safe haven” that can preserve your capital under any circumstances.

After all, all other investment instruments do not act as the property itself, but only in the form of rights to it. Exercising such rights under adverse conditions can be problematic. Governments simply do not allow citizens to approach precious metals, so that people cannot protect their economic interests at the expense of their liquidity and remain defenseless against any financial arbitrariness. This is how big money is made.

Of all assets, in fact, gold has the highest real liquidity. It can be exchanged at any time for the fiat currency of any country or the necessary goods in the event of a depreciation of money. The spread when buying and selling precious metals can be compared with the similar indicator of securities of successful large companies. And selling the precious is much easier and faster than Bitcoin.

If liquidity is an opportunity to quickly and profitably exchange goods, then gold is one of the most highly liquid assets. If you suddenly need cash, how quickly can you get it from the sale of personal real estate? It will take weeks, if not months, to search for a buyer and complete all the paperwork. You can get money from the sale of gold in a few hours! Gold is traded around the world 24/7. You can even choose the required currency when exchanging precious metals for it.

Maintenance – BTC Wins

Simply having BTC costs you nothing, while you have to pay for storage for gold. Gold is not called a precious metal for anything. It does not react chemically and is one of the most durable materials on the planet. Every ounce that has ever been mined is still on Earth, excluding the small fraction that was used in spacecraft.

When calculating with money, their amount is very important. For example, if you pay in gold for the purchase of a house worth 200 thousand dollars, you will need about 5.5 kg of precious metal.

When calculating in gold, you need to check its authenticity to make sure that it is indeed gold and not a fake with metallic tungsten. The gold must somehow be delivered to the place of settlement, and if it crosses the border, then special fees must be paid.

To this must be added the cost of currency conversion, since there are hardly any people who will take gold as payment. This will add another 10-15% to the cost. Thus, if you buy a house for 200 thousand dollars, which is located in another country, you will need another 1 kg of gold for overhead costs.

In turn, Bitcoins do not need to be transported anywhere. They are found wherever the Internet is. Bitcoin is placed on a public ledger called blockchain and doesn’t need to move anywhere. The only thing that is required in order to “get” Bitcoins from your wallet is a secret key that can be copied, memorized, or written down. No fees need to be paid when crossing the border.

Already, there are hundreds of thousands of places in the world where you can pay with Bitcoins without converting them into some currencies. All you need is a smartphone.

As a result, in the category of maintenance Bitcoin definitely wins.

ROI – BTC Wins

bitcoin compared to goldBTC will simply make you more money if you invest in it compared to gold. It turns out that if you take the period from 2013 to the current moment and look at every day from the point of view of the ROI of an investment in Bitcoin, it turns out that with a Bitcoin price of about $ 12,000, 97.6% of the days in the specified period give a positive result for investors.

This circumstance once again confirms the thesis that it is very important to look at the dynamics of the Bitcoin price in the long term, and also try to avoid investing in cryptocurrency when it rises to some serious local highs.

However, the last statement should not be taken absolutely. The fact is that if you do not take a few days in December 2017 and January 2018, as well as the period from the end of May to the beginning of June 2019, when cryptocurrency No. during the “crypto winter” of 2018, the entry into the Bitcoin market was very profitable.

If we take a look at how Bitcoin progressed throughout the last years we can assume that it is an excellent investment tool compared to gold. If you were to purchase Bitcoin for $20,000 the volatility could cause its price to go up to $40,000 in several days meaning that you would make massive profits in no time. This makes Bitcoin a more advantageous option compared to gold.

What Did We Learn From This BTC vs Gold Guide?

Bitcoin cannot be forged: Unlike gold, Bitcoins cannot be counterfeited or deteriorated. When buying gold, you will have to check the quality and fineness, which is not always possible.

Limited quantity: Both physical and digital gold need to be mined, their quantity is limited and cannot be obtained from anywhere.

Gold is more reliable: The reliability of gold is higher since it will always remain gold and it is not threatened with complete destruction.

Both can be used as a safe haven: They are used as a safe haven in global shocks. When the country’s economy becomes unstable, people begin to massively buy gold and Bitcoin.

Common Questions On Bitcoin and Gold

Is It Better To Buy Gold Or Bitcoin?

Bitcoin is showing itself as an excellent investment vehicle. Yes, the crypto market is unpredictable and more volatile. However, it also gives a higher profit during growth.

Gold is a more conservative option for those who are not ready to get involved with the cryptocurrency market or who do not trust it for a number of reasons. However, at the same time, it will not give the level of profitability that cryptocurrencies can give.

In addition, cryptocurrencies are traded 24/7 and can be exchanged for fiat at any time. To buy gold, you need to have an investment account in the bank, you can sell it only at a strictly defined time by the exchange, and also pay interest to brokers and the bank.

Bitcoin, in general, is not as stable, however, is more profitable in terms of investment.

How Is Gold Different From Bitcoin?

Volatility, storage methods, sources of demand, and widespread use are the four main categories that distinguish Bitcoin from gold. In 2017, Bitcoin grew by almost 140%, while gold rose by 30%.

Aside from volatility, the second most important factor that differentiates both assets is their versatility and their usefulness as a medium of exchange. In this case, the popularity of Bitcoin is growing every year, but it is difficult for it to compete with an asset that has been used for at least 5,000 years and was the basis of currency exchange around the world (the gold standard) several decades ago.

Is It Smart To Invest In Bitcoin Gold?

Bitcoin gold is a fork to Bitcoin which appeared back in 2017. If you are a long-term investor who is not afraid of ups and downs investing in Bitcoin gold is definitely worth it. Crypto is developing rapidly and can bring certain profits in the long run. Investors who are confident should definitely purchase this asset.