The Benefits of Owning Bitcoin Over Gold
At first glance, comparing a shiny yellow metal known for its precious value to a newly minted, sometimes volatile digital currency may seem out of place at best and unfair at worst. But in fact, when we dive deeper into the mechanics that governs Gold and the dynamics that drive Bitcoin, it becomes clear that the comparison is not only fair but, at times, Bitcoin gains the upper hand.
So how and when can Bitcoin outshine Gold? To answer that question, we must first understand the forces that govern each.
What Really Drives Gold?Gold has gained a reputation for being a safe haven in times of turmoil.
What Drives Bitcoin?The value behind Bitcoin is a bit more complex. Bitcoin, unlike Gold, is not driven by investment but rather by its adaptation and acceptance.
Bitcoin has only been around since 2008 and as such, has not generally been accepted as a valid form of payment. And because Bitcoin is still not accepted as a form of payment in most places of business, most holders need to convert their Bitcoins back to the local currency in order to actually spend it.
But that is now changing and Bitcoin, despite some setbacks, is becoming more and more popular. Companies such as Amazon (AMZN), Target (TGT) and even Subway are now accepting Bitcoin. And the more businesses accept Bitcoin the less need to convert it back and so the value of the currency rises.
Of course, the risk in Bitcoin is the opposite of Gold. The entire capitalization of Bitcoin in circulation across the world is merely $7 billion. Just for comparison, total Gold reserves around the world are estimated to start at 150,000 metric tons, which is worth roughly $.5.4 trillion. That means that in turbulent times, when fear dominates, a currency such as Bitcoin can lose value quickly.