Is Bitcoin the new Gold?

The notion that Bitcoin is the digital equivalent of gold has caused enthusiasm among crypto aficionados.

13:03 23 November 2021

The notion that Bitcoin is the digital equivalent of gold has caused enthusiasm among crypto aficionados, while sparking off fresh debates among cynics who think gold and Bitcoin are not comparable and poles apart.

 

Cryptocurrencies as a novel asset class have seen a meteoric rise in the last 18 months or so. In what has been a roller coaster ride so far, Bitcoin, the leader of the pack, has managed to convert a good number of non-believers. Buoyed by its ability to put behind a huge decline and post new highs, a large number of investors and traders are jumping at the opportunity to buy Bitcoin and hold them for as long as possible. Maybe you’re thinking along the same lines, too. As they say, make hay while the sun shines. Get in on the act and find your way to making a huge bitcoin profit. Check out this link to see how you can tap the potential of an advanced automated crypto trading bot to your advantage and wade through the uncertainties of the Bitcoin market and still turn a profit.

 

This rally played a vital role to spur investments of unthinkable proportions not just into Bitcoin but the broader market of cryptocurrencies, making even wary traders and investors take the plunge into the crypto world with confidence and enthusiasm. The world of crypto is expanding at a fast rate and there is a definite uptick in crypto patronage all over the world.

 

But it comes as no surprise now that a lot of people are starting to see Bitcoin and cryptocurrencies for what they are. There is a faction of participants in the market who strongly believe that their investing into Bitcoin regarding it as the new gold will prove to be a financially prudent move in the years to come. Naysayers might not concur, but the fact remains that the narrative about cryptocurrencies such as Bitcoin, Ethereum, is changing dramatically and people are starting to realize that these alternative currencies have all the makings to be the new gold. They tick quite a few boxes as an alternative avenue of investment and potential store of value for people looking for non-mainstream options and as a hedge against a slump in the market and inflation for the others.

 

 Bitcoin is Scarce, Just Like Gold

Of the growing list of reasons why Bitcoin continues to be in the limelight, its scarcity is noteworthy. Bitcoin is what it is right now, because of its fixed supply scarcity and growing demand. That’s a combination only Bitcoin enjoys, compared to other cryptocurrencies. No wonder top advisories like JP Morgan sing its praises, likening it to digital gold.

 

The supply of Bitcoins is hard-capped and tops out at a whopping 21 million, of which around 19 million are in circulation already and the remaining 2 million coins will take approximately 100 years to mint. Now that’s scarce. Add to this the threat of rising inflation and the devaluing US dollar, and that is where Bitcoin gets all its value from.

 

There is no such cap on Gold or the US dollar for that matter. With the US federal government rolling out a stimulus package to the tune of US$3.5 Trillion to help the economy weather the COVID storm, there is no way the world will run short of US dollars anytime soon. And that leaves just Gold and Bitcoin in the equation, making them scarce and hence truly invaluable. But here’s a little food for thought. We can’t figure out how much more Gold can be mined in the future, but we will only have 21 million Bitcoins in circulation at any given time. To put it in layman terms, when the demand for gold goes up, we can find more gold (through mining) to meet the increase in demand. But when Bitcoin’s demand picks up, only one thing can change and that’s price. It works on the principle called absolute scarcity (time to brush up on some economics basics maybe), which also explains why the market is really volatile.

 

Bitcoin’s Step up as the New Inflation Hedge

The threat of inflation, negative interest rates, stock market crash looms large especially in the post pandemic era. In these turbulent times, when volatility and uncertainty in financial markets became the new norm, everyone expected gold to literally explode through the ceiling, but the precious metal has not budged at all. Having said that, Bitcoin has essayed its meteoric growth from being valued at next to nothing to well over $60000, an astronomical rise a good part of which happened well under a year. This enormous rally has got everyone thinking whether all the money that went into gold during turbulent times has started going into Bitcoin and other leading cryptocurrencies. This is not a conspiracy theory by any stretch of imagination, given the sudden uptick in the number of transactions of Bitcoin, Ethereum etc and the buzz around the crypto market in general.

 

Nobody can put a number on what a single unit of Bitcoin would be worth 5 years ago, but one can say with confidence that the era of cryptocurrencies has well and truly begun, and we are on the cusp of something huge. Going back to the main argument, whether Bitcoin will be the new gold is not easy for anyone to predict. But digital currencies like Bitcoin could very well displace gold, becoming the deserving heir to the throne of the ‘hedge against inflation’. And that can happen a lot quicker if significant measures are taken to make these markets regulated and to improve acceptance, stability, and innovation in the world of crypto.