Ever since it’s been in the headlines, Bitcoin has been called “digital gold.” While Bitcoin does not have ornamental benefits, It is a scarce alternative asset class and can be used as a store of value, much like Gold. Bitcoin’s advantages include data redundancy and smart contracts.
In 2008, Satoshi Nakamoto created Bitcoin with the aim of having a “trust-less” cash system and removing the third-party intermediaries that are traditionally required to conduct digital monetary transfers. Third parties incur high costs for conducting these services; these costs are then passed on to end-users and can restrict transactions below a certain size.
Launched in 2009, the price of one bitcoin was only a few dollars in the first few years. Bitcoin’s popularity rose when it reached parity with the US dollar at a 1:1 ratio in 2011. Bitcoin went from $4.60 to $425 between 2011 and the end of 2015. This is a growth of over 9000%, something that has never happened in the history of finance.
Bitcoin as the Digital Replacement for Gold
Bitcoin has many of Gold’s qualities, with the obvious exception of tangibility. Bitcoin checks off the Gold’s most distinctive quality: scarcity. Both Bitcoin and Gold have limited supply.
Both are a medium of exchange and can be divided into units of account. Gold is an intermediary instrument, while Bitcoin is more of a system used to facilitate the sale, purchase, or trade of goods between parties. For a system to function as a medium of exchange, it must represent a standard of value. A unit of account is a standard monetary unit of measurement of value/cost of goods, services, or assets. Gold is divisible into half ounces or quarter ounces, and bitcoin is divisible into 1 satoshi, which equals 1/100,000,000 bitcoin.
Gold is a good store of value because it has no shelf life. A store of value is the function of an asset that can be saved, retrieved, and exchanged at a later time and be predictably useful when retrieved. More generally, a store of value is anything that retains purchasing power into the future. A store of value maintains its value rather than depreciating. Bitcoin has played this role in the past, but during the current crisis, its behavior has been more similar to the stock market. Some bitcoin skeptics also argue that it has zero intrinsic value since it’s intangible.
In 2021, we might see Bitcoin’s potential as a store of value, and in the coming months, it could significantly outperform the stock market. Bitcoin is still a relatively small asset class, mostly favored by millennial investors who aren’t as influential in the financial markets yet, compared to gold preferred as a store of wealth typically by more mature investors. Billionaire investor Mike Novogratz believes Bitcoin is “digital gold” and won’t be used in the same way as traditional currency for at least the next five years. More and more people are going to want it as some portion of their portfolio. The size of the cryptocurrency market has grown from $195 billion to around $955.70 billion in 2021. Bitcoin is, by far, the largest digital coin in circulation, with a market cap of $244 billion and accounts for 61% of the total market.Investors will always see Gold as a hedge against financial uncertainty, while Bitcoin as a speculative investment. As of now, Bitcoin will continue to be a prominent way to exchange value globally, safely, and privately. If you want to make investment in Bitcoin to make good money from it then Bitcoin Code is for you. Check out Bitcoin Code Reviews by users to know more further.