Bitcoin has been on the rise for the last decade. For people with no knowledge about Bitcoin, this asset looks far more valuable than gold. The reality, however, is far from this. Technically, both gold and Bitcoin are assets with high return potential that can act as a hedge against inflation and volatility. But this is where the similarities among them end.
Bitcoin is a new asset or currency, that has embraced the world. Many qualities of Bitcoin, such as untraceable transactions etc., make it more attractive to some consumers.
Let us have a look at the differences between Bitcoin and gold.
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Test of Time: gold has been here for centuries now and has been used by many civilizations. The yellow metal has always been used as a currency, wealth, or insurance against uncertain times. Another major use of gold has been in jewelry. Bitcoin, on the other hand, arrived just a decade ago and has not passed the test of time.
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Safe Haven: Safe haven is the term used for assets, properties, or places that can serve as a safe place to be during periods of economic or political turmoil. Gold is considered to be a safe haven asset, however, we have yet to see if Bitcoin survives the market volatility in the long run.
Gold inherently acts as a hedge against downturns, uncertainty, or inflation.
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Tangibility: Precious metals like gold are tangible, which means they can be held or stored physically. Bitcoin, however, is a virtual currency and it exists solely in the cybersphere.
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Usability: Gold has more to offer if we come to the usability of gold and bitcoin. As we discussed earlier, gold has been here for a long time, and people use it for various purposes. From jewelry, coins, gold bars etc. to using it as purely an investment option, gold has lots of applications. Bitcoin is not yet established to offer anything other than its current status as a highly volatile short-term investment option.
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Volatility: assets that are used for financial gains are always volatile to some extent, but Bitcoin has been extremely volatile since its launch. Gold is less volatile due to the time it has spent in the market and the fact that it has multiple applications. Investors have some idea about gold, and how gold will behave in certain circumstances.
The differences between the two currencies or assets are there. However, the differences may be eliminated in the future and although we are certain that gold could be replaced by some other asset in the foreseeable future, we can expect the differences to reduce. Cryptocurrencies are here to stay, at least for the foreseeable future. If Bitcoin remains stable over a long period of time, and its behavior remains consistent during periods of uncertainty, we can expect Bitcoin to stabilise in time.
In terms of investments, Bitcoin is an option if you are looking to diversify your investment portfolio. If you have invested in precious metals, stocks, bonds and commodities, then you could add Bitcoin into the mix. Its high volatility, which may give you an opportunity to reap high returns. However, it is important to be careful with investments that are so volatile.
