Gold has always been a popular alternative asset class. It is considered a safe haven among investments whenever investors feel that it’s too risky to continue investing in other assets, such as the stocks of a company there are holding or the currency they are trading. However, gold is no longer the only place where money can be invested in times of uncertainty. Bitcoin has also already become an alternative as viable as gold. In this article, we will have a comparison between gold and bitcoin, and see which one is better at which parts.
The first and most important difference between these two assets is that gold is actually a physical commodity. That means investors can actually tough and feel it. Meanwhile, bitcoin only exists in the digital world. It doesn’t exist as a tangible object.
It is almost impossible to diminish the quality of gold or dent the metal and this is why people always develop ways to check for the purity of gold. On the flip side, the most popular digital currency is largely unregulated. That tells us that it is ripe for manipulation. The fact that there is no central governing entity regulating bitcoin makes it more susceptible to scams.
An alternative asset class can be considered to be all about liquidity preference. In other words, investors want an asset class that it easy to convert into cash in the event of a crisis.
Gold has a long history of surviving crises since it has been used for centuries by various civilizations. Every time the value of fiat money plummets down to zero, gold becomes the default currency. This decision is not taken by any government.
Rather, it is done by the market itself. Even in the middle of a serious crisis like hyperinflation, gold can still be exchanged for goods and services.
Bitcoin is relatively new and has yet to prove that it can navigate a crisis. It is quite difficult to imagine the way bitcoin will work in such a situation where there might be no electricity, which means the method for online transaction may be compromised.
The value of gold has been relatively stable for many, many years. Indeed, there have been price increases and price slides, but there have been no instance where it swung wildly in just a day, unlike bitcoin.
Bitcoin has seen its value increase at a rate of 10 percent a day. The price has shot up from $1000 to $20000 in nearly just one day.
Therefore, bitcoin cannot be said as a stable means of storing value. The price rises and falls very quickly. In consequence, the amount retrieved by investors may be different from the amount they had initially invested in bitcoin.
One of the largest questions about bitcoin is its energy efficiency. Without diving into details, bitcoin needs an energy that burns 12 barrels of oil to mine a single unit of it. At present, all the bitcoin mining activity in the world is consuming more energy than the country Nigeria, sporting a population of more than 90 million people.