Comparing Bitcoin and Gold as a store-of-value

Virtual currencies poised to take over the yellow metal
  • Traditionally, gold has been the orthodox asset seen as a store-of-value.
  • Financial systems worldwide have their economies structured around gold as it is a finite natural resource.
  • Albeit being a virtual one, Bitcoins are finite and now challenge gold’s traditional stature.

Bitcoin has come far from being just a concept on Satoshi Nakamoto’s paper in 2008. The genesis block (block number 0) on the blockchain was mined by the creator sometime during 2009. There had been no looking back since then. Within a period of about thirteen months, Bitcoin achieved break-even with the US dollar and currently, it is valued at well above $50,000 each.

The transition from gold to Bitcoin

Cryptocurrencies were established with an intent to provide an alternative to fiat currencies, which are controlled by central regulatory authorities. It is only natural that several comparisons between gold, the central piece of financial systems, and virtual tokens have been carried out from time to time. Recently, an analyst from Bloomberg named Mike McGlone had published an extensive report detailing the prevailing juxtaposition. His report was published in the March edition of Bloomberg’s monthly crypto assets report.

The parameters of comparison between bitcoin and gold

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McGlone had published a well-rounded graph for easier visual differentiation. In his conclusion, he stated that Bitcoin is poised to take over gold as the most significant asset that acts as a store-of-value.

He first charts the growth of gold-based exchange-traded funds (ETFs) overtime to back his claim. It had seen a rapid increase during the years of 2018-2019, and however, since October 2020, the graph shows a complete downward trend. This displays the diminishing popularity of gold ETFs among the people.

Secondly, the physical price of Bitcoin and gold are directly compared. Though gold seemed to have the edge initially, the crypto eventually caught up with it and has now replaced it as the world’s most expensive asset.

Lastly, fluctuations in market prices are compared. Traditionally, gold has been relatively stable even as Bitcoin had suffered from huge market fluctuations. However, with more and more private investors and companies joining the bandwagon and expressing interest to invest, Bitcoin’s prices, since the dawn of 2021, have stabilized around the $45,000-$50,000 range.

Though gold will continue to be seen as major assets and be used in jewellery and associated industries, Bitcoin, with its accelerated pace, will replace the shiny yellow metal as a viable store-of-value in any investment portfolio.

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Ritika Sharma
Ritika Kumari Sharma is an Economics Honors graduate from the University of Calcutta. She is completely into finance and believes that cryptocurrencies are the future. She is an enthusiast learner about the cryptocurrency and blockchain technology.

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