How do the two assets compare as a store of value at the moment?

Bitcoin vs. Gold: How do the two assets compare as a source of value right now?

Bitcoin vs. Gold: How do the two assets compare as a source of value right now?

The Bitcoin community insists that crypto resources are a digital version of gold. Like yellow metal, it can be used as a safe haven for resources.

Several wealthy investors, institutions, celebrities and corporations have added Bitcoin to their reserves.

But how does this innovative new digital asset compare to the world’s oldest and most popular value-added store? Here’s a closer look.

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Track record

Gold obviously has a longer track record than its digital rival. Although Bitcoin was created 13 years ago, gold preceded human civilization. The earliest record of gold used for decoration is 4000 BC. Even before that it has the potential to be used for other purposes (possibly exchanges).

In these four millennia, gold has played an important role in world politics and economy. In fact, most global currencies depended on the price of gold until 1971. Simply put, there is much more time to prove its worth as a treasure trove of gold.

But just because Bitcoin is new doesn’t mean it’s less secure. The underlying blockchain has never been hacked, and resources have certainly helped Creation More assets than gold in the last 13 years.

Advantage

Although the gold head is a wide start, investing in Bitcoin is reasonably more convenient.

Unlike physical gold, Bitcoin can be stored online or in a software wallet. It can be moved around the world in a matter of minutes at minimal cost.

Currently, the average bitcoin transaction costs around $ 1.50 and can be completed in about 10 minutes.

By comparison, physical gold needs to be stored securely, physically moved and protected around the clock – making it less convenient for the digital age.

Instability

Although Bitcoin is easy to store and transact, it is much more volatile than gold.

The standard deviation of Bitcoin in terms of portfolio optimization – a measure of how far it can go in both directions – is 4.34. Compare that to the gold standard deviation.

If you are looking for a more stable asset, gold is definitely the best choice.

Reciprocity

Mutual relationships are a key factor when measuring the risk of a particular asset.

If the value of a given asset goes away independently from the economy or other traditional investments, adding that asset can significantly reduce the risk to your overall portfolio.

Correlation coefficient from -1.0 (a perfect negative relationship) to +1.0 (a perfect positive relationship). 0 shows no relationship.

Bitcoin’s correlation with US stocks has reached as high as 0.66, so this is not the best way to lower the risk profile of a traditional portfolio.

The gold-stock relationship changes over time depending on the different economic conditions. But in times of extreme stock market volatility, gold prices have a low or even negative relationship with the S&P 500.

Reserve assets of the central bank

Gold is used as a reserve asset by central banks around the world – a key factor that sets it apart from Bitcoin.

Countries such as France, the United States and Germany each have gold reserves as a safe haven with countries close to 80% of the total gold reserves. This use as a reserve asset puts a theoretical level on the price of gold.

Bitcoin has just begun to gain acceptance from governments around the world. El Salvador created bitcoin legal tender last year, and other countries like Brazil and Mexico are considering the same.

Some governments are also considering digital resources as a way to avoid sanctions. Russia, for example, is considering accepting Bitcoin as payment for its oil and gas exports.

Delivery

Gold is naturally distributed around the world. Australia has the largest proven reserve of 20% gold of global power. Meanwhile, already mined gold jewelry is widely distributed among buyers, corporate buyers and the central bank.

Until recently, most bitcoin mining was done in China. But since the Chinese crackdown on crypto mining, the percentage of computer power used in the process – the so-called ‘hashrate’ – has been widely distributed around the world. In fact, no country currently has more than 35% mining capacity.

Already mined bitcoin has been similarly well distributed.

Satoshi Nakamoto is the anonymous founder of the largest bitcoin holding network. Nakamoto has 1 million bitcoins, which is about 4.7% of the total supply. Public companies hold about 1%.

Culture

In some parts of the world, hoarding gold is deeply rooted in local culture. For example, it is an essential part of rituals and weddings in India, which is why Indian families have 1.5 trillion in gold reserves.

Bitcoin is also rapidly gaining cultural credibility. According to several surveys, nearly half of North American millennials say they will keep a portion of their savings in bitcoin.

The role of crypto in internet culture and meme investment is making it a major force in the global economy. It remains to be seen whether this cultural revolution will displace gold.

The last row

Gold is certainly more stable and time-tested than Bitcoin. However, the shortcomings of Bitcoin are being fixed quickly and young investors are embracing it in greater numbers.

Over time, the world’s most popular cryptocurrency could actually meet its potential as digital gold.

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This article provides information only and should not be construed as advice. It is provided without any warranty.

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