Does Bitcoin Truly Have The Potential to Oust Gold As The Leading Store Of Value Asset?
Since the inception of Bitcoin, the Bitcoin vs Gold has been brewing. And for obvious reasons. Bitcoin was purposefully designed to mimic some of gold’s unique natural properties. You even “mine” for new Bitcoin digitally like people mine physically for gold, and the supply is purposely limited.
Still, for all they share, precious metals and cryptocurrencies are very different assets that serve vastly different purposes in an investor’s portfolio. Gold has served a big role in various portfolios, and Bitcoin is becoming a major innovation to complement and/or replace cash or precious metals in several applications.
With all these comparisons, it is ironic to see that Gold and Bitcoin have almost never have had an identical trend.
One of the key differences in these two assets has been volatility. In 2017 Bitcoin’s volatility was demonstrated to exciting effect, rising from $1,151 to $19,783 between January and December. It then plunged to $5,951 by February 2018, before rallying again to $11,537 over a matter of days. Gold has seen a much less volatile journey in recent years; since 2013 the price has held fairly consistently at around $1,225 ranging between $1050 and $1400. In 2017, there wasn’t a single day when Gold traded gained or lost over 2.5%.
Gold has over 7,000 years of trust behind it and their use cases are defined. On the other hand, Bitcoin doesn’t have a fixed use case. Although strictly talking about the medium of exchange, Bitcoin is a far superior product. Skeptics of Bitcoin argue that the cryptocurrency has no value and is merely worth what the next person is prepared to pay for it.
Strictly talking about if Bitcoin will ever replace Gold, it is too early to tell. We have to wait for the next Global recession to see how Bitcoin holds up. The cryptocurrency can’t replace gold as a precious physical asset as it isn’t a tangible commodity, while its volatility means it is unlikely to replace gold as a safe haven. Although as Bitcoin gets more stable with regulations, we can assume that the tides may start to turn.