Precious metals like gold have traditionally been a safe haven for investors around the world during troubled times. However, recent revelations suggest that Bitcoin could overtake gold as economic and geopolitical risks increase in the modern climate. The search for investment safe havens has long been a priority for investors, and now more people than ever before are looking towards the cryptocurrency market.
According to Clem Chambers, the chief executive of stock research site ADVFN.com, Bitcoin is essentially Gold 2.0. He stated:
‘Crypto, and right now bitcoin especially is the new gold. It is better for what gold-lovers like to do with gold – store it for the day before the end of the world when they expect gold will be the only thing that will retain value.’
It might appear to outsiders that gold and Bitcoin have nothing in common. Indeed, one is a physical item investors can see and hold in their hands, and the other is certainly not. One is human-made, and the other is a natural resource. Still, believers in Bitcoin claim there are similarities due to Bitcoin’s fixed supply properties. There are only twenty-one million Bitcoins in circulation, and that figure will never increase, although it is possible to divide each coin into one-hundred-million Satoshi.
Adrian Ash, director of research at Gold broker Bullion Vault does not agree with that sentiment, and he was recently quoted as saying:
“Limited supply could equally be true of other goods and assets, and it is not clear why that gives something value. Gold 2.0 is an interesting idea but misses the point – Bitcoin couldn’t be less like gold. Gold’s essence is its physicality and indestructibility.”
The roots of value
In the past, gold was a universal equivalent that people within societies could exchange for commodities as a measure of value. In the simplest explanation, the value is determined by the cost of extracting the material and bringing it to the marketplace. That helped to create an atmosphere of certainly surrounding gold that is rarely found when opting for fiat currency investments. Just as you can’t create more gold out of thin air, the same is true for Bitcoin.
Is it all about trust?
We live in a time when many investors and other people do not trust governments around the world, and bankers seem even less honest following the devastating financial collapse of 2008. Therefore, Bitcoin has become an attractive prospect due to the lack of centralised authority and its immutability.
In the same way that gold has no intrinsic value, Bitcoin does not generate income on its own. Also, it’s important to remember that neither of those investment solutions are everyday currencies regardless of Bitcoins promotional materials that market it as peer-to-peer electronic capital.
While Bitcoin will never replace precious metal investments entirely, and it’s unlikely to take over from fiat currency any time soon, the popularity of the cryptocurrency is set to increase as investors encounter ever more threats and risks in the marketplace.
As Clem Chambers said:
“Bitcoin is new wealth in the same way that a new gold mine would make the world wealthier. There is no reason that bitcoin can’t be worth what all the gold on earth is worth, or much more.”
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