5 Similarities Between Gold and Bitcoin - Know in Details
Sep 07, 2020 06:22
Gold has been one of the best investment assets for many investors for a long period. It has served as an alternative investment option during a market crash, financial crisis, or any economic downturn. Additionally, many people use gold for hedging and reducing their risk of losing value during inflation.
In recent years, bitcoin is adopted as one of the best investment assets of the digital age. Many big investors also call it ‘digital gold. In this article, you will find the five major similarities between gold and bitcoin and whether you should invest in them or not.
Similarities between Gold and Bitcoin
Understanding the similarities and differences between gold and bitcoin is crucial before investing in them. Here I will be sharing the similarities; you can find the differences in one of my previous articles. Gold and bitcoin have the following similarities:
●Both Gold and Bitcoin Hold Form of Value
●Supply is Fixed
●Considered as Safe Haven Assets
●Can be Hedged against Inflation
The article will help you to clearly comprehend why so many investors are comparing bitcoin and gold. Meanwhile, you can check out the how to use Bitcoin as Digital Money, if you want to start a business with a little investment. Now let us understand the above points in detail.
1. Both Gold and Bitcoin Hold Forms of Value
Gold has been maintaining its value for a long time. So it is one of the most trusted and valuable investment assets, among others. People value it and consider it as an authentic and most legitimate store of value. Moreover, people are socially and emotionally inclined toward gold while investing.
After the invention of bitcoin, people have discovered a new form of the store of value. Despite the fact, bitcoin is a highly volatile and risky investment, but people trust it due to its high returns and store of value. Many bitcoin investors consider that bitcoin is better than fiat currencies as it is a trusted form of value.
2. Supply is Fixed
Another similarity between bitcoin and gold is fixed supply. Both have a limited supply, and the process of creating new bitcoin or manufacturing gold is called mining. However, the amount of gold is not known, whereas there are only 21 million units of bitcoin.
Presently, 18.6 million bitcoins are in circulation, and the rest bitcoins are estimated to be mined before 2040. On the other hand, it is very hard to estimate how much gold is present inside the earth’s surface and how much time it will take to extract.
3. Considered as Safe Haven Assets
Gold and Bitcoin are considered as safe-haven assets. Although some people do not agree that bitcoin is comparable with gold in terms of a safe investment, many bitcoin investors have proved it wrong.
The only concern about bitcoin is it is highly volatile. However, it has considered being a safe haven due to its high returns, and it is maintaining its value. Recently, during the coronavirus pandemic, the value of bitcoin fell from nearly $10,000 to $4,700. But only in three months, it bounced back to its previous value, and now it is hovering around $11,000 - $12,000.
4. Can be Hedged against Inflation
Both gold and bitcoin can be hedged against inflation. One of the major problems with fiat currencies is that the government can devalue or inflate them to stabilize the economy.
During market downturns or any financial crisis, governments take loans and spend them to save the economy and print fiat currencies to pay the debts. In such situations, gold and bitcoin can be hedged against inflation because the value of these two can’t be controlled by governments.
Lastly, both of the assets have a fixed supply but high-demand. So gold and bitcoin have scarcity in the market. As a result, their value is increasing in the market, and it will continue to grow in the future.
Wrapping It Up
Finally, I hope you got to know the similarities between gold and bitcoin. However, it is important to note that bitcoin is relatively riskier and not as safe as gold. Because it is very new in the market, and there are many other risk factors involved in bitcoin. If you have any queries, please mention below and share your opinion on this.
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