The total estimated market cap of gold today is about $13 trillion. The crypto market is valued at about $1 trillion. Bitcoin is still far behind gold, but the progress is impressive. Today, lines of code can compete with an asset that has been used for thousands of years. Some people even call Bitcoin “a new gold”. How far is it from the truth? Let’s figure out.
Similarities and Differences
Whether cryptocurrency can be called the new gold is a matter of debate. There are some similarities between the two assets, but there are also some key differences.
Similarities
- Both gold and cryptocurrency are scarce assets. There is a limited supply of gold in the world and a limited supply of cryptocurrency (in the case of Bitcoin, there will only ever be 21 million coins).
- Both are seen as a hedge against inflation. When the value of fiat currencies (like the US dollar) decreases due to inflation, the value of gold and cryptocurrency may increase.
- Both gold and cryptocurrency are decentralized.
Differences
- Gold is a physical asset, while cryptocurrency is a digital asset. Gold can be held and stored in physical form, while cryptocurrency exists only as a computer code.
- Gold has a long history of use as a store of value, while cryptocurrency is a relatively new asset.
- Crypto is widely accepted for payment, while gold can’t be used this way.
To sum up, gold and cryptocurrencies are both scarce and decentralized assets that can act as a hedge against inflation. However, gold is a tangible, time-tested store of value, whereas cryptocurrencies are newer, digital assets that can be used more easily for payments.
Historical Value
The value of gold has been relatively stable over the long term. In the past 100 years, the price of gold has only doubled a few times. Gold is seen as a hedge against inflation: it maintained its value while currencies were losing it constantly.
The price of Bitcoin has been much more volatile than the price of gold. In the past 10 years, the price of Bitcoin has skyrocketed and crashed several times.
- Gold price change in last 10 years (2013-2023): 70%
- BTC price change in 10 years: 24 782%
*Still, high returns in the past don’t guarantee high returns in the future.
Which fits better to hedge against inflation?
Gold has a longer track record of being a hedge against inflation, so it is generally seen as a better choice for this purpose. Bitcoin has the potential to replace the precious metal, but it doesn't have enough credibility yet.
Which is more stable?
Gold is more stable than cryptocurrencies. The price of Bitcoin has fluctuated wildly in recent years, making it a risky investment for some people.
Which is a better investment?
Gold is considered a safe asset, and Bitcoin is more risky but can potentially bring more profits. Ultimately, your best investment will depend on your circumstances and risk tolerance.
The right choice may be to have a diverse portfolio of different assets: not only gold and Bitcoin but also stocks, CFDs, etc. For example, the FIXONE Global Trading platform combines 9 market sectors on one platform. There you can easily convert funds from one asset to another.
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