- James Wo, Founder of DFG Group, tweeted, “Bitcoin is better than Gold in every aspect, but the market cap of Bitcoin is less than 4% of Gold.
- Gold one of the most valuable commodities, and it is evident from the fact that governments keep a considerable gold reserve and issue currency by backing it with Gold.
- Bitcoins are considered the right choice by safe-haven investors because every year, around 3300 tons of Gold mined.
People called this statement ridiculous. Bruno Skvorc, owner of Bitfalls.com, mocked Wo saying if the above statement in the best and “dumb conflating of unrelated statistics” that are useless is the best reason to claim Bitcoins are better than Gold then Bitcoin is doomed. But why Bitcoin cannot be better than Gold? Is it always better to have Gold instead of Bitcoins? Let’s see.
Why is Gold valuable?
Gold one of the most valuable commodities, and it is evident from the fact that governments keep a considerable gold reserve and issue currency by backing it with Gold. During a war, if a country is losing its money will become useless, but the Gold could still trade at its actual price.
The value of Gold is essential for people as well. They don’t trust in paper currency or electronic currency, which can tamper with, but Gold is something they would readily accept.
However, Gold is susceptible to deterioration as it was found by a depositor in the US who was paid back in Gold bars made from coins instead of the pure Gold bars he deposited. Gold has other issues that make it difficult to invest in. If you are a billionaire, then it wouldn’t be advised to keep all your wealth as Gold.
Could Cryptocurrency be a better alternative to investment in Gold?
Now, with the arrival of Bitcoins and other cryptocurrencies, Gold is under a slight threat. These coins used at places which were previously the domain of Gold, and no, I don’t mean jewelry made of Bitcoins. Bitcoins are now considered an excellent way to keep your investment safe and also used as flight haven.
Bitcoins are considered the right choice by safe-haven investors because every year, around 3300 tons of Gold mined. It means that nearly $200 billion worth of Gold added in circulation.
However, previously mined Gold is also present in the market. Now, taking into account the global population of 8 billion people. The Gold mined is worth $25 per person if they want to get it.
Every year we get $6.5 billion worth of Bitcoins in the market. When looking at the demand of haven-assets, Bitcoins would be more accessible.
However, when looking at the change in values of these commodities, the amount of Gold mined next year would be the same, but the cost of Bitcoins would decrease due to halving.
As one can see that the number of bitcoins reduced every four years. So, ideally, if they were equivalent of Gold, the results should have been the same to that of half the Gold mines getting closed every four years. However, this isn’t the case.
The drastically different outcome of decreasing the number of Bitcoins and Gold produced is the reason why Bitcoins is not as popular as Gold when it comes to investing money, and it will take a lot of time if ever to reach that level.
But, if you are looking to keep your investment safe without any worries of linking it to a physical commodity, then Bitcoins and altcoins are one of the best possible options that you have.
So, it can conclude that at the moment, Wo’s statement of Bitcoins being a lot better than Gold is not 100% accurate, but there are times when Bitcoins are a better option.