Bitcoin's (Cryptocurrency: BTC) Prices are at an absolute bargain. Thanks to recent approvals and launches, this digital asset has soared his 311% since the beginning of 2023. spot exchange traded investment trust.
What's interesting is that we're also seeing some bullish momentum in gold.Its price is recording area In the same way. But when you compare these two assets, it becomes strikingly clear: top cryptocurrencies It has a great advantage over precious metals. Let's take a closer look at Bitcoin and gold.
some similarities
First, I think it's appropriate to understand how Bitcoin and gold are similar. After all, there's a reason why many investors think it's prudent to compare the two.
Bitcoin and gold have a certain level of scarcity. At some point in the future, there will only be 21 million Bitcoin tokens in circulation. And there is only a certain amount of gold in the Earth's crust.
Basic economic principles say that when the supply of something is constant and demand increases, the price should rise. A simple rule helps explain why gold has generally been considered a safe asset to hold for long periods of time.
These two assets have some utility beyond being used as store value. Gold is primarily used for jewelry because of its luster and rarity. However, in industrial use cases it has little value as input.
Bitcoin's decentralized and global nature and the fact that it is not controlled by a single entity makes it useful for sending large sums of money directly to anyone. The final and near-immediate settlement is also compelling.
noticeable difference
Bitcoin and gold have some surface-level similarities, but dig deeper and you'll find that they are very different. Bitcoin has a number of properties that make it better than gold.
Scarcity is a topic we should revisit. Although the supply of gold may seem fixed, it is not. According to the U.S. Geological Survey, about 77% of the gold known to exist in the Earth's crust has already been mined. There are still large reserves underground. If the price of gold skyrocketed tomorrow, it would be economically possible for mining companies to invest aggressively to enhance their ability to mine more deposits.
Essentially, if demand is strong enough, the supply of gold can adjust. It is also possible that gold deposits will be discovered in space.
This theme of scarcity is where Bitcoin truly shines. Bitcoin is absolutely finite. As written in the software, the number of coins in circulation cannot exceed 21 million. Unless the majority node Even if we agree to increase supply, this will not change. Bitcoin has historically been very volatile because supply cannot adjust to trends in demand.
Because Bitcoin is a digital asset, it is easier to carry than gold. Bitcoin is divisible to 8 decimal places and can be used for transactions. It is not practical to use physical gold to pay for everyday purchases. In this respect, gold lacks practicality.
And when it comes to the store of value debate, gold falls short of Bitcoin. After all, investing is about increasing your purchasing power over time. Bitcoin won this battle spectacularly.
Over the past five years, the price of Bitcoin has soared 1,630%, while the price of an ounce of gold has risen only 58%, meaning those who buy the digital asset will be much better off financially. is showing. And this was at a time of heightened macro uncertainty due to the pandemic, inflationary pressures, and rising interest rates. Of course, the value of gold does not fluctuate much, so it can be said to be an asset that is psychologically easy to own.
Looking ahead over the next five to 10 years, the comparisons between Bitcoin and gold will continue. But based on everything we've discussed here, the world's most valuable cryptocurrency is in a league of its own.
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Neil Patel and his clients have no positions in any stocks mentioned. The Motley Fool has a position in and recommends Bitcoin. The Motley Fool has a disclosure policy.
Why Bitcoin is a better asset to buy and hold than gold was originally published by The Motley Fool.
