Both gold and Bitcoin share a special characteristic because their number of units is limited worldwide. Although gold continues to have a great reputation and support over several centuries, recent gold market challenges showed a slight advantage that Bitcoin has taken over the precious metal.
This observation arises from the restriction of the market supply, which is that of the gold market in New York, which faces a historical contraction to the extent that the pandemic produced by Covid19 has restricted some physical trade routes; at the same time, investors accumulate the metal as a safe haven; hence some investors and bankers, face a great shortage of gold bars and coins.
Similarities between gold and Bitcoin
- There are some similarities between gold and Bitcoin, among the most prominent are:
- A limited quantity of units.
- They have tried to be copied or controlled.
- They are widely accepted in their sector.
- They are used as patrimony support.
- They were questioned at the time.
Is gold still king?
Gold is the king of non-productive assets; on the other hand, works of art, seeing them as an investment, can also be considered a “non-productive” or speculative asset. Silver and other precious metals fall into this same category as gold. However, gold is still more interesting as an investment, as gold occupies a preferential place in the monetary policy of the world’s central banks, as it is used in reserves internationals of a country. Thus, the expression “digital gold” means that Bitcoin is the “king of non-productive/ speculative assets,” but in the digital field. This is not to say that Bitcoin is used like gold in central banks’ monetary policy framework worldwide.
Will Bitcoin be the Substitute for Gold?
It is considered feasible to use the market capitalization of gold as a reference to talk about the market capitalization of Bitcoin. This does not imply that Bitcoin is literally the substitute for gold in the global macroeconomy, gold is still relevant in the market, and it is partly because gold remains an international reserve asset of many countries and frequently is used as collateral by governments to obtain financing in the international market, that is a peculiarity of gold, something that does not happen with art, diamonds or other speculative assets.
Considering Bitcoin a safe haven can be considered somewhat contradictory, especially if its volatility is considered. We must consider that if Bitcoin rises in price, it is due to global demand and economic policies (due to a large FIAT money printing). However, Bitcoin is based on blockchain technology and is the most solid cryptocurrency in the market; the average person tends to buy Bitcoin more for speculative reasons than for other reasons. On the other hand, some people trust blockchain technology more than their own governments’ economic policies.
What do you think about this topic? Do you think that Bitcoin could take the place of gold as a source of support for the economy?
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