Being here for a while, gold has been field-tested numerous times and is widely considered a strong safe-haven asset. The main reason behind it is that gold constantly maintains its value as an asset and/or material for goods like jewelry & electronics, as well as being highly scarce. Regardless of the demand, its supply is always limited and cannot be increased by manufacturing or whatsoever. That distinctive feature distinguishes gold from many other assets like stock shares and even money that could be printed by the government and banking institutions. As a result, gold has almost no correlation with the above-mentioned assets, proving a static & reliable way to hedge against market fluctuations, especially in the case of swings of at least 10%.
Bitcoin, on the other hand, is a cryptocurrency that is based on blockchain technology. Being as revolutionary as it is, many still consider it to be a «digital gold» due to some properties that two assets share. Just like gold, Bitcoin shows a very weak correlation with other types of assets. What is more, Bitcoin’s limited supply and the way one can acquire it closely mimics the nature of real gold. Having said that, should people start widely investing in cryptocurrency the same way they used to invest in gold? Well, let’s leave this question open for future discussion.
Just a quick run up about Bitcoin for those who haven’t visited our Bitcoin Articles & Guides section yet.
The world’s most popular cryptocurrency has a limited supply (just like gold). Satoshi Nakamoto, the creator of Bitcoin, capped BTC supply at 21 million tokens. What is more, Bitcoin cannot be created by either bank or government, or any other institution, instead it can only be «mined», just like gold. The only difference between mining gold and Bitcoin is that the latter’s process involves substantial computing power that individuals called «miners» use to verify transactions on the Bitcoin blockchain network, as opposed to actual physical mining. More about the mining process is explained in this article. The entire process is needed to maintain the Bitcoin system, which by itself stimulates miners by rewarding them with actual BTC coins.
Someone might say that these two assets are incomparable due to Bitcoin’s relatively short presence. Moreover, cryptocurrency, which Bitcoin is a part of, has gained widespread recognition only a couple of years ago. Nevertheless, the two have quite a lot in common and are frequently considered great investment options.
Gold has been around for centuries and, thus, has all the necessary legislation to control its trading, distribution, etc. It is hard to counterfeit, steal or corrupt this asset in any way. Just like gold, Bitcoin is also almost impossible to corrupt due to its well-thought-through encryption, decentralized system, and sophisticated algorithms. However, unlike gold’s, Bitcoin’s legislature is, for the most part, not there quite yet. Unfortunately, this puts Bitcoin in a so-called grey area, without a proper mechanism to govern or control it.
While this might not be a necessity for Bitcoin to have these laws in place to control it due to the way it works, but being on a safer side of things has never really hurt anyone, right?
As we have already stated above, both assets are scarce, meaning their supply is limited. While we know that Bitcoin’s supply is capped at 21 million, the actual amount of gold that humanity can possibly mine is unknown. This is not to say that gold’s supply is unlimited. Science tells us that there could only be this much of such a resource and that it would simply run out at some point in time. Interesting, but there are rumors that gold could be mined from asteroids, which has never been done before. Although it currently sounds futuristic, quite a few companies have already shown interest in doing it.
Gold has been widely used as a source of value for hundreds or even thousands of years. It has found its application in jewelry, dentistry, and even electronics, making it really hard to question why this precious metal has its value.
On the other hand, Bitcoin’s value lies in one of its initial purposes - to provide an alternative to a traditional financial system, which many have no access to. The revolutionary blockchain technology offers its users a secure, reliable, and comparably cheap way of transacting without limits. However, the concept of cryptocurrency has yet to reach its peak.
Liquidity is something that both assets have in common. Gold and Bitcoin (as well as any other cryptocurrency) can be easily exchanged for fiat money at any time via special services like, for example, an exchange platform. Both markets would be affected and show rapid price fluctuations if a large amount of either gold or bitcoin is being purchased or sold at once. Nevertheless, high liquidity is what these two have in common.
Last but definitely not least is volatility. If you are reading this article, then you must have heard stories about Bitcoin prices rising to record-breaking heights but then drastically dropping in value. Even though Bitcoin has been around for only a couple of decades now, its price has increased by roughly 40 million percent (from its starting price of less than 10 cents to its peak one of more than 40 thousand dollars)! While many Bitcoin investors and enthusiasts have made their fortunes on such price spikes, there were many of those who were less lucky due to equally rapid Bitcoin price drops like, for example, back in 2018-2019 when Bitcoin went from around $20,00 per coin to $4,000 within less than a year.
Gold, however, has shown itself to have a less volatile market for various reasons, some of which we have mentioned above. Thus, it is widely considered a much safer asset. If the volatility of your assets is your main concern, but you would like to stick with cryptocurrency anyways, a good idea would be to check out other available cryptocurrencies like Etherium, Litecoin, Ripple, and even Tether, which is directly linked to the US dollar (similarly to how gold used to).
We hope this Bitcoin article finds you useful and guides you further into the world of crypto. If you are interested in learning how to use Bitcoin and other cryptocurrencies for betting purposes, we would like to invite you to the list of our recommended online Bitcoin sports betting sites.