Before the advent of Bitcoin, holding gold was a wise choice. It provides portfolio diversification, protection against currency depreciation and inflation, and allows for self-custody of wealth and reduced trading risk.
The simplest example is that if you store gold and the bank fails or goes bankrupt, you still have your wealth. There is no institution that can prevent you from accessing the wealth stored in gold.
Gold has a long history and has maintained its near-universal value for centuries. During these centuries, fiat currencies have all devalued to zero, while gold has maintained its purchasing power. For some people living in countries with severe inflation, gold is often the best way to preserve and protect wealth.
The gold ETF GLD was launched in 2004, injecting billions of dollars of liquidity into the gold market. Gold experienced a massive bull run in the following eight years. It outperformed most assets during the 2008 financial crisis, making many people wealthy.
Bitcoin has many of the same advantages as gold
- Portfolio diversification, a hedge against governments’ inability to responsibly manage budgets (leading to national debt, inflation, and currency debasement), and everyone can own and keep Bitcoin.
You don't need a bank or exchange to access, store or send your Bitcoin.
If Bitcoin solves many of the same problems that gold ownership solves, then why has it outperformed gold so much over the past decade? First, I will share the reasons why Bitcoin is a better store of value than gold, and then I will explain why Bitcoin's value will continue to exceed any gains that gold may make.
The fundamental reasons why Bitcoin is more worth holding than gold:
Bitcoin is exponentially more divisible. Each Bitcoin is divisible into 100 million units, called Satoshis. At the same time, each ounce of gold can be broken down into grams. One pound equals 453 grams. Therefore, the smallest denomination of gold is worth about $86, while 1 Satoshi is currently worth $0.00064.
If you buy and sell physical gold, you pay high fees both ways . In addition, if you own a large amount of physical gold, you may need to pay someone else to keep it safe, which costs at least 0.5% per year.
Unfortunately, sacrificing security introduces additional counterparty risk to whoever is holding your gold.
Meanwhile, Bitcoin can be stored indefinitely in a digital hardware wallet, which typically requires a one-time fee of $100-400.
The total supply of Bitcoin (21 million Bitcoins) is known, while the total supply of gold is unknown. Bitcoin's current inflation rate is 0.84%, and it will only go down . As the price of gold rises, gold miners can find ways to mine more gold.
There may be vast deposits of gold that we are not aware of today.
Bitcoin is portable and easily verifiable. Try traveling with large amounts of physical gold.
1) It’s not secure
2) It is usually illegal and you need to report it if you cross a border
3) It’s heavy and bulky, limiting how much you can carry.
Furthermore, gold is relatively easy to counterfeit. Here’s a story about 83 tons of gold that turned out to be painted copper: But don’t worry about these issues with Bitcoin. It’s just unique.
Bitcoin is easier to spend. While buying a coffee is inefficient today, 15,000 businesses around the world accept Bitcoin.
If you take a step forward and learn about decentralized finance, you can get a mortgage with your Bitcoin in minutes. Meanwhile, no legal business accepts gold for the reasons stated above.
Now that we have concluded that owning Bitcoin makes more sense than physical gold for self-custody of personal wealth, let’s explore why the price of Bitcoin will continue to outperform gold over the next decade.
The price is going up. Compared to gold, Bitcoin has done very well. Even if you bought Bitcoin at its highest price every year for the past five years, its performance would outshine buying gold on its cheapest day every year.
Money flows and momentum. Money is flowing from gold to Bitcoin. This shift is because speculators want to invest for greater returns, and as more wealth is transferred to younger people, we should expect Bitcoin to gain more market share.
BTC ETFs are seeing record inflows. As expected, funds are flowing out of gold ETFs. Verify it for yourself here:
JPMorgan, Barclays and Scotiabank are among several banks that have been fined for manipulating the gold market. The assets that investment banks have been controlling don’t sound ideal.
Bitcoin has a dual narrative. Its store of value story is reflected in the banking crisis of March last year. It also has a technology narrative that can be easily linked to hot topics such as artificial intelligence. Try using physical gold in a digital world.
Bitcoin and established Altcoin have outperformed stocks in various countries. Therefore, he believes that they are a major macro opportunity driven by factors such as central bank currency debasement.
The adoption of blockchain technology is undeniable, but it requires patience. Unfortunately, people often expect immediate results, which is not the law of exponential growth.
Believe in the long-term potential of Bitcoin and the cryptocurrency industry. The blockchain industry is constantly developing and innovative projects are constantly emerging.
The task now is to find solid projects with strong fundamentals and bet on them. But we must also understand that not every project in the crypto space will survive.
