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Here’s why Bitcoin is a better asset to buy and hold than gold
BitcoinThe price of (CRYPTO: BTC) has reached an all-time high. Since the start of 2023, this digital asset has soared 311%, thanks recently to the approval and launch of spot exchange traded funds.
Interestingly, gold is also experiencing bullish sentiment. Its price is in registration territory Also. But when comparing these two assets, it is evident that the leading cryptocurrency has a huge advantage over the precious metal. Let’s take a closer look at Bitcoin and gold.
Some similarities
I think it is first appropriate to understand how Bitcoin and gold might be similar. After all, there’s a reason why many investors find it wise to compare these two.
Bitcoin and gold have certain levels 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 show us that if something has a fixed supply and demand increases, the price should increase. This simple rule helps explain why gold is generally considered a safe asset to hold for long periods of time.
Besides being used as store value, both of these assets have some utility. Gold is mainly used in jewelry because of its luster and rarity. But its value as an input in industrial use cases is minimal.
Due to its decentralized and global nature, coupled with the fact that no single entity controls it, Bitcoin is useful for sending large sums of money directly to anyone. The final and almost immediate settlement is also convincing.
Notable differences
Bitcoin and gold have some superficial similarities, but as we dig deeper we will see that they are very different. Bitcoin has many properties that make it superior to gold.
Scarcity is a topic we should revisit. The supply of gold may seem fixed, but it is not. Of all the gold known to be in the Earth’s crust, about 77 percent has been mined, according to the U.S. Geological Survey. There is still a lot of it left underground. If the price of gold were to skyrocket tomorrow, then it would become economically feasible for mining companies to invest aggressively to build their capacity to extract more deposits.
Basically, the supply of gold can be adjusted if the demand is strong enough. It is also possible that gold deposits could be discovered in space.
It is on this topic of scarcity that Bitcoin really shines. Bitcoin is absolutely limited. There can never be more than 21 million coins in circulation, as written in the software. Unless the majority of nodes agree to increase the supply, this will not change. Supply cannot be adjusted to match demand trends, which is why Bitcoin has always been extremely volatile.
The story continues
Because it is a digital asset, Bitcoin is also more transportable than gold. Bitcoin is also divisible up to eight decimal places and can even be used in transactions. Using physical gold to pay for everyday purchases is simply not practical. In this regard, gold lacks utility.
And when it comes to the store of value debate, gold doesn’t hold up against Bitcoin. Ultimately, investing is about increasing your purchasing power over time. Bitcoin wins this battle with flying colors.
Over the past five years, the price of Bitcoin has soared 1,630%, while the price of an ounce of gold has only increased 58%, demonstrating that someone purchasing the digital asset would be in a much better financial situation. And this was happening at a time of heightened macroeconomic uncertainty, with the pandemic, inflationary pressures and rising interest rates. Of course, because its value fluctuates little, gold is probably an easier asset to own on a psychological level.
If we look at the next five to ten years, I’m sure 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 its clients have no position in any of the stocks mentioned. The Motley Fool posts and recommends Bitcoin. The Motley Fool has a disclosure policy.
Here’s why Bitcoin is a better asset to buy and hold than gold was originally published by The Motley Fool