Bitcoin vs Gold are two different assets but they have their own advantages and disadvantages. The emergence of Bitcoin in 2009 began to shine after reaching its highest price at the end of 2017. Meanwhile, Gold has existed since ancient times and has become an asset called a precious metal with a value that is more than just money.
The growth of the two has had a different increase, in 2020 the price of Bitcoin has increased beyond Gold. This condition led to the debate between Bitcoin vs Gold to emerge so that various kinds of speculation emerged which was the best for the portfolio.
Both Bitcoin vs Gold is very different types, where Bitcoin is a cryptographic currency called a digital coin. While Gold is a precious metal that has a high intrinsic value because it is not easily changed over time.
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About Bitcoin cryptocurrency
Bitcoin cryptocurrency is a digital currency introduced by a person with the pseudonym Satoshi Nakamoto, So for Bitcoin fractions using the size of Satoshi which is the name of the initiator of Bitcoin.
In the campaign of cryptocurrency, Bitcoin offers a wide variety of advantages over the flat currency. One of them is Bitcoin is limited in a number of 21 million blocks, so it is safe from inflation. The idea is that if demand increases and this limited item can increase the value of these goods. This is what distinguishes it from flat money that is printed according to market demand, making it vulnerable to inflation.
Bitcoin is decentralized finance and there is no specific authority in control, because with a mining system using Proof of Work a transaction will be confirmed by miners who use Bitcoin mining machines to solve complex mathematical algorithms to validate a transaction.
Meanwhile, flat money is controlled by the central bank and all policies depend on the intermediary authority. They regulate the interest rate, the money supply so that the transfer fee requires higher funds. Bitcoin offers low fees for cross-border transfers, thus providing an advantage when transferring large funds.
About Gold metal commodity
Almost everyone knows gold as a precious metal that can be used as jewelry, especially for women. However, the exact history of the discovery of gold is still not bright. Because there are different stories that obscure since when gold was discovered.
There are reports that gold has been found by archaeologists in Spain, in caves, and is estimated to be around 40,000 BC. But there is another story that gold was first discovered by a boy when he saw a rock with a shiny color in a river several thousand years ago. However, it was not explained in detail when the kid found the shiny yellow metal.
Another theory states that gold is not something that originally came from the earth, but it was the result of a meteorite collision containing gold which then fell to the earth. Regardless of the news, gold is a precious metal that is still in great demand by many people, especially women for jewelry accessories.
Even in its history, gold was once a medium of exchange before money was accepted by society. This is an alternative bartering which is subject to various obstacles.
Until now, gold is still a valuable asset, even the development of online media allows a person to save gold but he does not physically hold the gold, but when he wants to take the gold it will be sent via a delivery service.
What correlation between Bitcoin vs Gold?
Bitcoin is a digital currency, the crypto asset Bitcoin shares many similarities with gold. The main thing is that they are both rare and require large amounts of energy and costs in the production process. This condition makes Bitcoin and gold considered valuable assets, especially in the long term.
Gold, like a physical form, is a precious metal because it cannot rust and is in limited quantity. It is considered good because of its yellow sheen, making it worthy of being used as jewelry. It is also used as an investment instrument from generation to generation, timeless.
In contrast, Bitcoin is a digital coin, the result of programming using cryptography, and communication network technology. Therefore Bitcoin cannot be stored in a physical safe like gold. Bitcoin cannot be made for jewelry. But why can Bitcoin be of high value, even higher than gold? The answer is “trust”.
In its development, Bitcoin is also known as electronic cash, cryptocurrency, and crypto asset. Bitcoin is a system platform that delivers blockchain technology. Blockchain offers transparency, immutability, credibility, democracy, and freedom. That reason is public trust in Bitcoin.
This explains why Bitcoin is the asset with the largest valuation in the world, according to Bank of America, even surpasses the asset that has been dominant for centuries, namely gold. Bitcoin is similar to gold, durable, and irreversible. This nature depends on the decentralized network blockchain that supports Bitcoin.
Another similarity is that Gold and Bitcoin can be broken down into very small units. However, Bitcoin can be broken down into as small as 0.000000001 units. These small units are named a satoshi. Bitcoin denominations are cheaper instead of gold because they are digital money and not a physical commodity.
What is the difference?
Some people may call Bitcoin digital gold. But in fact, both have fundamental differences, even though they can function as investment assets. What are the differences between the two? The following description will reveal these differences.
Gold Price Is More Stable Than Bitcoin
Bitcoin is awesome, when it goes up it can happen quickly, but when it goes down it drops very deep. Daily fluctuations in the range of hundreds of Dollars are quite common with Bitcoin. Although Gold also fluctuates, the worst daily fluctuation is only in the range of a few tens of Dollars. In other words, Gold price movements are more stable than Bitcoin.
Image by Skew.
The increase in the price of Bitcoin in 2020 is indeed higher than gold, which means that the demand for Bitcoin has increased more than Gold. But be aware, history may repeat itself when the Bitcoin price dropped very deep.
Gold Demand From More Diverse Sources
Based on a report from the World Gold Council (WGC), about 50-60 percent of gold demand in the last 20 years from the jewelry industry. 30 percent for investment purposes, the remaining 10% for the technology industry and central banks. With various sources of demand, the differences in Gold and Bitcoin cause them to have different price stability.
Bitcoin is made with computers and software, gold is a natural resource.
Bitcoin is created on a network of computers and complex software, which are difficult or impossible to hack. But it has crucial weaknesses like human creation. For example, the problem of Bitcoin scalability, namely the longer the queue of transactions, so that the time and fees required for the cost of using Bitcoin increase.
On the other hand, Gold is a natural resource produced by mining, through routine operations. Gold buyers come to sellers where the gold is available.
Bitcoin is Easier to Carry instead of Gold
To store Bitcoin, only by having a “wallet” in the form of a special application that can be installed on a cellphone or other gadget. Meanwhile, even though Gold could be printed from a per gram count, it was quite a hassle to carry around. Therefore, Bitcoin can be considered more portable instead of gold.
Bitcoin Can function as a Payment Tool, Gold cannot
Bitcoin is a digital currency that can function as a means of payment and is even considered freer than flat money. Because it can make cross-border transfers using the internet. Although gold in the past used to be a means of payment, nowadays gold is mostly used as jewelry and investment assets. Because a small fraction of gold is in grams, then when you want to buy an item with a price of 1 $ it is impossible to pay 1 gram of gold.
Marketcap Bitcoin vs Gold
Bitcoin’s current market capitalization stands at $ 355 billion, while the gold limit is around $ 9 trillion. Gold’s market cap is roughly 30 times higher than Bitcoin at press time. Although currently, the market capitalization of gold is higher than instead of Bitcoin, one Pompliano analyst predicts that Bitcoin market capitalization may exceed gold by 2029. The forecast was posted via Twitter and received responses from several users.
In terms of price, gold has indeed scored a new highest price in 2020 during the pandemic which reached $ 2000 in August 2020, around the 6th. But after that the decline happened gradually, this is what distinguishes Bitcoin which can go down even up to 50% in a shorter time.
Source Goldhub
The image above is an infographic of gold prices for 10 years, with a curve that tends to be stable. While the 2020 Bitcoin price has posted a high increase of 180%, this is higher than gold which only posted around 11.8%. Meanwhile, within five years it reaches 100%.
Source Coinmarketcap.com
This increase in value indicates that Bitcoin still attracts investors to buy it, so this makes Pompliano predict Bitcoin’s market capitalization will exceed gold. This is also a result of increasing internet users so that Bitcoin is an asset that is easily accessible wherever it is.
Will Bitcoin overtake Gold?
This is a discourse that was raised to the public, will Bitcoin take over gold? Nothing is certain for the future but just possibilities. Some analysts expressed their opinion such as Bobby Lee, the former CEO of Bitcoin exchange BTCC, predicting that it would happen and would take nine years.
Lee had a reason because Bitcoin’s deflation would help him achieve a high market cap when compared to gold. As it is known that Bitcoin will be halving every 4 years or after 21 thousand blocks are mined. The halving will cause deflation due to scarcity after the halving.
In the meantime, gold is the most preferred asset, but it’s possible that Bitcoin will shift that position. Because Bitcoin is easily accessible, especially for young people, it can quickly overtake the market capitalization.
The volatility of Bitcoin vs Gold
One of the differences between Bitcoin vs Gold is all about volatility. In fact, Bitcoin’s moving average is higher than instead of Gold. With higher volatility, the risk of Bitcoin is also higher. Therefore, you should understand and apply risk management when trading Bitcoin.
Source Dailyfx
The graph above shows that Bitcoin volatility is higher than gold where there is a difference of around 5.8% when Bitcoin volatility reaches 7.7%. From this comparison, it is concluded that Bitcoin provides more opportunities in terms of price volatility than gold.
This condition is often used by speculators to take short-term profits on Bitcoin. But the value of Bitcoin is also easily influenced by news, this is what needs to be underlined that Bitcoin trading needs to keep up with the latest news developments.
Bitcoin vs Gold chart
Source Buybitcoinworldwide.com
The price of Bitcoin can be converted into a fiat currency, as well as with other digital currencies such as Ethereum. And for the conversion of Bitcoin prices in gold from data obtained on Buybitcoinworldwide.com on November 30 for 1 BTC is 10,587 once and if converted to Gram size 1 BTC is equal to 300,128 grams.
Bitcoin vs Gold investment
Bitcoin vs Gold is in the debate to choose which one is the best for investment. Looking at the history of prices, gold has a price that tends to be stable, so analysts provide suggestions for making gold a long-term investment.
While Bitcoin in the short term is very tempting with a significant increase in value leaving the gold. Commenting on the Bitcoin vs Gold debate, Bloomberg Intelligence analyst Morgan Barna said that instead of positioning gold and bitcoin as opposing assets, the two assets can be used as assets that complement an investment portfolio.
Morgan said that there are still many investors who consider bitcoin to be the best speculative asset at the moment. On the other hand, bitcoin has characteristics that have the potential to provide greater value to investors than gold. Therefore, he said that gold and bitcoin can complement each other’s portfolio of investors to get bigger profits.
Meanwhile, based on Bloomberg data, during the year the two assets have been running on a bullish path with bitcoin gaining around 206.59 percent against the US dollar and gold gaining around 10.88 percent.
Bloomberg Intelligence analyst Mike McGlone said that gold and bitcoin are predicted to continue strengthening throughout the second half of this year. Meanwhile, gold has the potential to continue the rally in the long run due to the possibility of easing monetary policy by the majority of central banks.
Final thought
Bitcoin vs Gold is an asset that is starting to be debated which one is better. However, investors will certainly consider a long-term portfolio. Not only focus on gold but also on Bitcoin, as the Bloomberg analyst suggested.
In forex trading both can be attractive assets to trade, gold fluctuates highly against the USD. With margin trading, it is possible to get high gains. Meanwhile, Bitcoin also has the opportunity to provide high gain with a significant increase in value.
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