Gold and Bitcoin have always served the same purpose of storing values for investors. However, each has got its advantages and disadvantages when used as such.
While many might be attracted to trade Bitcoin due to its decentralized nature and strong volatility, Gold on its part is more regulated and hence, a more reliable asset than Bitcoin. This work will help you learn some important factors that you need to consider while deciding between the two on the best store of value.
What is Bitcoin
Bitcoin is a popular Blockchain technology invented to offer users the opportunity to carry out decentralized transactions. It is also used today as a convenient store of value that hides the user’s identity. Bitcoin has no physical existence like the paper money we know today. It is virtual money which needs a network to function.
What is the use case for Bitcoin?
- Used for making decentralized payments.
- Provides a convenient means for making international transfers at a cheaper rate.
- Used for hedging against inflation by investors.
What you need to know about Gold
Gold is a precious metal used as a store of value due to its durability. It can last more than a thousand years without losing its value. Gold is today one of the standard foreign exchange commodities used in hedging against inflations. It is often included in the major foreign reserve held by central banks across the globe for hedging the value of its currency against excessive devaluation.
What is the use case of gold?
Gold is a priceless commodity with several important use case seen below:
Manufacturing of jewelry: Gold is the most important item used in the manufacturing of jewelry and other precious items such as rings, medals, coins, championship cups, etc.
Health equipment: Gold is widely used in hospitals today for the production of heavy machines used in screening and examining patients.
Religious objects: Gold is a precious item used in designing many objects and images used in religious worship. It often serves as an ornament for adorning certain images used for worship.
Foreign reserve: Gold is an important foreign asset purchased by governments. It comprises a large volume of the foreign reserve held by the Central Banks for hedging against inflation.
Gold vs Bitcoin which is the best store of value
Very often investors are confronted with choosing between gold and Bitcoin which could pass as the best store of value. While each has its uniqueness, there are some special features of one above the other. We have highlighted these important features below.
Volatility: Bitcoin is more volatile than gold and has often yielded more annual returns than Gold since its creation. However, this volatility could also be a strong disadvantage for investors during the bear season when the prices crash.
Regulation: Gold is a regulated asset unlike Bitcoin. This gives investors greater confidence while storing their wealth using gold.
Use case: Gold has a more relevant use case in real life than Bitcoin. Gold is a widely demanded asset across the globe. This is quite different from Bitcoin which is just getting into the mainstream industry recently.
Maximum supply: One important advantage that Bitcoin has over gold is having a maximum supply of twenty-one million. This helps to create more value for Bitcoin over time. This is quite different for gold which has no maximum supply.
Historicity: Gold has existed for several centuries dating back to ancient times as a store of value. This is unlike Bitcoin which is still developing following its creation in 2009.
