Are Bitcoin and the physical asset gold really worthy of comparison? Is it possible that Bitcoin will replace gold as the new safe haven asset?
It is estimated there is around 171,300 metric tons of gold in the world. In contrast, Bitcoin is able to generate and support a maximum of 21,000,000 BTCs.
Over the years, Bitcoin has been dubbed ‘digital gold’ and compared to the precious metal.
Although Bitcoin is seen as a more volatile investment and attractive to those who want short-term potential gain, on the downside there is the risk of losing huge amounts of money.
Gold is seen as a ‘safe haven’ investment and viewed as a more stable asset that is guaranteed to return on your investment in the long term.
However, data from BuyShares shows that $1 invested in Bitcoin over ten years ago would have a return of $183,617.32 today.
Gold investors would have returns of $1.58 from $1 over the same period.
BuyShares report states that although gold returns have remained fairly constant over the same period, averaging at $1.44 gold’s highest return on a single dollar would have been recorded five years ago at $1.75.
One year ago, the dollar investment in gold would have generated an additional $0.33. The precious metal’s lowest returns would have been after nine-year investment at $1.19 a slight drop from year eight profit of $1.20.
BuyShares adds that Bitcoin's returns from $1 are 116,213 times higher than gold. BuyShares data showed that Bitcoin has better returns compared to gold despite a short period of existence.
BuyShares states: “Despite the digital asset having an upper in terms of returns, replacing gold is not a walk in the park. Gold has been around for decades than Bitcoin. Over the years, gold has remained lucrative while in the ten lifespan of Bitcoin, volatility has been a major issue.
“Gold’s value has been residing in an established history of commercial usage due to its anti-corrosive or conductive properties. For Bitcoin, the value resides in both the future value of online transactions conducted through its networks, but also in a sense of belief that eventually.”
Another issue that has recently come to light is the recent gold-counterfeiting scandal. On June 29, ZeroHedge reported the biggest gold-counterfeiting scandal in modern history with 83 tons of fake gold bars discovered in Wuhan, China’s equivalent to 22% of China’s annual gold production and more than 4% of China’s gold reserve as of 2019.
21Shares highlights in this case a dozen financial institutions, chiefly trust companies or shadow banks, loaned 20 billion yuan or $2.8 billion over the past five years with pure gold as collateral to Wuhan Kingold Jewelry Inc., the largest privately-owned gold processor in China’s Hubei province.
It was later found out that the gold was in fact, gold-plated copper. 21Shares argues that Bitcoin’s core attributes, such as open verifiability, unforgeability, and predictable supply, make such issues impossible.
Could Gold Lost Its Precious Status?
Another argument among Bitcoin bulls against gold is one day the commodity could flood the market. In a recent interview with Dave Portnoy of Barstool Sports, Tyler and Cameron Winklevoss commented that buying gold is risky because Tesla CEO Elon Musk has a plan to mine gold in outer space and flood the market with supply.
The twins have supported the argument which has been popular among bitcoin bulls: the cryptocurrency is a form of digital gold. The brothers are hoping to launch a bitcoin ETF and argue both gold and Bitcoin are scarce but Bitcoin is “better at being gold than gold is,” since it is much more portable: any amount of bitcoin can be held in a single string of numbers.
For now gold wins as it has a far greater tenure than Bitcoin – mainly because it has been used for more than 2,000 years and is widely recognised. Whereas, Bitcoin has only existed since the first block was mined in January 2009.
Gold is a commodity but attempting to classify Bitcoin has proved to be a bit more elusive.
The above in no way constitutes trading advice. Neither the author nor this website holds any liability or responsibility for any financial win or loss or legal proceedings that result from trading, investing or gambling at any parties referenced on this website.