The advent of forty years of high inflation and an increasingly alarming world economy have led many financial analysts to recommend investing in gold to hedge against fluctuations and a possible depreciation of the US dollar.
For many years, cryptocurrency traders have referred to Bitcoin (BTC) as “digital gold,” but is it really a better investment than gold? Let’s look at some of the traditional arguments that investors cite when promising gold as an investment and why Bitcoin could be an even better long-term option.
One of the most common reasons for buying both gold and Bitcoin is that they have a history of retaining their value in times of economic uncertainty.
This fact has been well documented and there is no denying that gold has offered some of the best wealth protection historically, but it does not always have the value. The chart below shows that gold traders have also been subject to lengthy price reductions.
For example, a person who bought gold in September 2011 would have had to wait until July 2020 to return to green, and if they continued to do so, they would be close to the plains or underwater again.
In the history of Bitcoin, it has never taken more than three to four years for its price to recover and exceed the historical high, suggesting that in the long run a BTC could be a better value.
Could Bitcoin be a better protection against inflation?
Historically, gold has been seen as a good hedge against inflation because its price tended to rise in line with rising cost of living.
But a closer look at the picture for gold compared to Bitcoin shows that although gold has risen by 21.84% over the past two years, the price of Bitcoin has risen by 311%.
In a world where total cost of living is rising faster than most people can afford, it actually helps to increase wealth rather than maintain assets that can outpace rising inflation.
Although fluctuations and price reductions in 2022 have been painful, Bitcoin has provided investors with significantly more benefits over many years.
Bitcoin could reflect gold in geographical uncertainty
Often referred to as the “crisis product”, gold is well known for maintaining its value in times of geographical uncertainty as people have been known to invest in gold as global tensions escalate.
Gold is called the crisis metal so I would assume that if we go into recession again, gold will rise as a commodity
– Scott Hempstead (@ scottytrip1) April 22, 2022
Unfortunately, for people who are in conflict areas or other areas that are experiencing instability, it is risky advice to carry valuables, as people are exposed to confiscation and theft.
Bitcoin offers more secure options for people in this situation because it can memorize seeding and travel without fear of losing their money. Once they arrive at their destination, they can rebuild their wallet and gain access to their wealth.
The digital nature of Bitcoin and the accessibility of many distributed marketplaces and peer exchanges such as LocalBitcoins provides a greater opportunity to acquire Bitcoin.
The dollar continues to lose value
The US dollar has been strong in recent months, but this is not always the case. At a time when the value of the dollar is depreciating against other currencies, it has been known that investors are flocking to gold and Bitcoin.
If various countries continue to move away from being a central US dollar in favor of the multipolar approach, there could be a significant flight out of the dollar, but that money will not go to weaker currencies.
Although gold has been the main asset for millennia, it is not widely used or recognized in our modern digital society and most of the younger generations have never even seen gold coins in person.
For these cohorts, Bitcoin represents a more familiar option that can fit into people’s digital lifestyles and does not require extra security or physical storage.
Connected: Argentines turn to Bitcoin amid inflation concerns: Report
Bitcoin is fear and deflation
Many investors and financial analysts point to gold shortages and supply constraints after years of declining production as the reason why gold is a good investment.
It may take five to ten years for new mines to reach production, which means that a rapid increase in supply is unlikely and central banks will slow down gold sales significantly in 2008.
That said, it is estimated that there are still more than 50,000 tons of gold in the ground, which miners would happily concentrate on mining in the event of a significant price increase.
– DeepSee-er (@ErDeepsee) March 7, 2022
On the other hand, Bitcoin has a fixed supply of 21 million BTC that will be produced for some time and its issuance is taking place at a known rate. The official nature of the Bitcoin blockchain makes it possible to know and verify the location of each Bitcoins.
There is no way to find and verify all the gold shops on this planet, which means that its true supply will never be known. Because of this, Bitcoin’s shortcomings win, without a doubt, and it’s the hardest form of money mankind has ever created.
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The views and opinions expressed herein are those of the authors only and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading business involves risk, you should conduct your own research when making a decision.
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