Many financial experts have suggested trading in gold to protect against uncertainty and a likely drop in the value of the US dollar. This is because inflation rates have been going up for forty years and recently the outlook for the global economy is getting worse and worse.
Bitcoin (BTC) has been dubbed “digital gold” by crypto traders for years, but is it a worthwhile choice over gold? Let's examine 4 reasons why Bitcoin could be better than gold for long-term investment.
Retention of value
One of the most prominent justifications for purchasing gold and Bitcoin is that they will have a track record of maintaining their value during periods of economic turmoil. This is a well-known fact, and there's no doubt that gold has historically provided some of the finest asset protection, though it doesn't always hold its value. Sometimes gold merchants have also been subjected to protracted periods of price drops.
For example, someone who purchased gold in September 2011 would have to wait till July 2020 to be back in the green, and if they kept holding, they would be near even or underneath once again. On a lengthy basis, BTC's price hasn't ever taken upwards of two to four years to recoup and exceed its all-time high, indicating that on a lengthy basis, BTC might be a superior store of wealth.
Is Bitcoin a stronger inflation hedge than other currencies?
Because gold's price tends to grow in tandem with rises in the cost of living, it was formerly thought to be an excellent inflation hedge. However, a deeper examination of the gold-to-Bitcoin chart reveals that, whereas gold has climbed by 21.8 percent in the last two years, the price of Bitcoin has accelerated by 312 percent.
Holding an asset that can outrun growing inflation helps create wealth rather than preserve it in a society where the general cost of living is going up faster than most individuals can bear. While the turbulence and price drops in 2022 were unpleasant, speculators with an inter-timeframe have seen substantially greater potential in Bitcoin.
During times of global unrest, Bitcoin may resemble gold.
Gold, often known as the crisis commodity, is well-known for holding its value throughout times of geopolitical instability, with individuals who are considered to invest in gold as global tensions mount. Carrying costly things is a dangerous idea for people living in war zones or other unstable locations, since they may be subject to confiscation and theft.
For individuals in this position, Bitcoin is a safer alternative since they can learn a seed word and travel without concern about losing their money. They may reassemble their wallets and have access to banking services once they arrive at their destination. Bitcoin is easier to use because it is digital and because there are many decentralized markets and peer-to-peer exchanges, that let people trade Bitcoin with each other.
The dollar dominance may be over?
In recent months, the US dollar has been strong, but that isn't always the case. Traders have indeed been known to rush to gold and Bitcoin when the dollar's value declines versus other currencies. If many nations continue to shift away from a US dollar-centric strategy in favor of a much more multipolar one, there may be considerable dollar flight.
While gold seems to be a ready commodity, it is no longer commonly utilized or acknowledged in our current digital culture, and most millennials have never ever seen a gold coin. Since it can be integrated into people's digitally infused routines and does not need additional security or physical storage, Bitcoin is a more familiar alternative for these groups.
Scarcity and supply limits for gold, because of years of diminishing output, are cited by many investors and investment professionals as reasons why gold is a smart investment. It can take anywhere from five to ten years for a new mine to start extracting gold. This makes it unlikely that the supply will grow quickly, especially since central banks stopped selling gold in a big way in 2008.
It is estimated that there are still approximately 51,000 metric tons of gold in the earth, which miners would gladly concentrate on mining if prices rose significantly. On the other hand, BTC has a finite amount of 21 million, which means no more will be generated. The Bitcoin blockchain's public nature enables the whereabouts of each bitcoin to be recognized and confirmed.
There will never be a way to really find and authenticate all the gold stores on earth, which means the actual supply will never be known. So, Bitcoin easily wins the “there aren't enough of them” argument.
BTC has showed promise as a store of value and some analysts are calling it a better inflation hedge than gold. The main attractiveness of the cryptocurrency is it’s confirmed finite supply and the ability to use decentralized applications and hold money away from traditional finance institutions. The drawbacks are the wild swings in its value and that although it’s being promoted as the digital gold, it’s value tends to move with risk assets in a downturn.