Several people seem to know at least something about Bitcoin. You may think it's going to be the next big thing or think nothing of it. But if you're looking to make a huge investment soon, you would rather know what's good for you.
Choosing to invest in gold or Bitcoin seems tough- both have their advantages and disadvantages. If you're raring to go, you need to read a few important things before you invest.
Here are a few ways you can compare gold and Bitcoin.
Clearly, gold wins in this aspect for investors; it's been around for over 2,000 years! The Turks were the first to use this precious metal as currency way back in 550 BC. While this practice was prevalent in other countries for many years, many countries
started favoring the use of paper money to represent the value of gold.
Under the 'Gold Standard', several of the world's currencies were fixed to gold at a set price by weight by the later part of the 19th century. With the demise of the system, gold was no longer used as a form of currency or as the basis of currency. The
yellow metal is now looked upon only as an investment asset.
On the other hand, Bitcoin though successful as
a virtual payment system, has only been around since 2009. You never know when a competing crypto currency might become more popular than Bitcoin. It is also possible for someone to find and point out a major flaw in the whole system too!
Medium of Exchange
While both gold and bitcoins are less accepted in return for goods or services, some states are figuring out ways to use US bullion coins as fiat money.
As Bitcoin has only been around for a while, it has far less acceptability than gold. Though it certainly is the fastest-growing medium of exchange, don't expect to go grocery shopping with your Bitcoin wallet.
Ease of Use
Online transactions using credit cards or PayPal are always done with the help of an intermediary. With Bitcoin, the transaction is simpler and cheaper as it is peer-to-peer. Of course, you can't use gold for online transactions!
Furthermore, carrying bitcoins worth thousands of dollars is easier and safe. You can't walk around town with that much cash or gold without attracting attention.
Gold being a precious metal, has been valued for its properties for years
depending on metal purity. Bitcoins on the other hand, don't have any intrinsic value. They can only be exchanged with another person willing to accept them.
Experts believe that an object needs to have commodity value first before it can have monetary value. And this is what happened to gold; it was first valued as a commodity and was more suited to hold monetary value than other commodities.
While Bitcoin is replicating many characteristics of gold, it cannot replicate the intrinsic value of gold.
Store of Value and Volatility
Money, foreign currency, precious metals like gold, silver, and platinum, precious stones, real estate, crypto currencies like Bitcoin, etc. are all assets that can be saved, exchanged, or used to trade. Most importantly, they are predicted to be useful
when retrieved at a later time. These assets are thus functional as a store of value.
At present, the total number of bitcoins that can be mined has been capped at 21 million. The Bitcoin mining process creates 25 bitcoins every ten minutes. This number is expected to halve every four years, which means that the 21 million cap will only be
reached in 2140.
On the other hand, though there are vast gold reserves, at present, the amount of gold mined on any given day remains fixed. New gold reserves are being scoured and the discovery of new reserves can bring about volatility in the price of gold. Furthermore,
in case the price of gold rises in the future, the new tracts can become economical, expanding the supply of gold.
While gold has limited reserves, there is no limit on the amount of gold that can be mined. True, as Bitcoin is a new technology,
it is much more volatile and the value of bitcoins is more likely to go down to zero than that of gold. But considering the fact that bitcoins won't be mined once the 21 million mark is reached, they can serve as a store of value much better than the yellow
Bitcoin is a rival to government-issued currency and it also makes it easy to execute big transactions online. As such, Bitcoin is ideal for black market transactions.
Further, there is much greater insurance risk involved with Bitcoin. If you have a large amount of gold stashed away legally, you obviously have it insured. But when it comes to crypto currency, no federal or government program insures Bitcoin exchanges
or accounts. So if your hard drive crashes, or your digital wallet is hacked into and you lose everything, you might not be able to anything to get it all back.
If you buy gold from trusted sources, you’ll definitely be safe. But the world of bitcoins is open to fraud. Watch out for false bitcoins and Bitcoin Ponzi schemes!
If you want to stick to time tried investment methods, go for gold! If you’re willing to take on some risks, Bitcoin can be just the thing for you. With the information provided here, you’ll be able to make up your mind easily.
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