Suppose you invested $1 in Bitcoin around 12 years ago. Today your Bitcoin holdings would be more than $300k! But if you had invested the same amount in gold, it would have given you just $1.42.
I read this through casually first and then realized the weight of the statement. Wait, what did I just read? I do know cryptocurrencies bring a lot of profits, but now that I think about it, I never realized the teenager Bitcoin could challenge gold already and win!
I went into research mode and made my calculations.
Bitcoin: 300% increase in the last two years
Gold: 21.4% during the same tenure
And with that, I realized exactly how far ahead Bitcoin is. Thinking back, in the past few years, Bitcoin has given huge returns while growing as a store of value, and at some point, gold has fallen behind. People have now started to think that Bitcoin investments are a better option in the long term than gold. In fact, Bitcoin is often called the ‘digital gold’ for its worth as an asset class.
In this article of Bitcoin vs. Gold, let’s see how Bitcoin has performed in comparison to gold so far, and if now is the right time to call it a haven for investors.
Can Bitcoin be called Digital Gold?
All of us love gold and other precious metals. And these metals have always been the center of attraction for investors who put their investment in gold to be saved from global recessions and the fallout of the economies. A recession causes the stock market, currencies, and economies of the world to decline. But gold has stood out and survived the blow with minimal fall in the price. One such example is the more than 29.5% increase in the prices of gold during the economic recession in the 2000s.
For this reason, investors have always considered investing in gold as a surety of being a safe haven asset in comparison to other stocks and assets which fall steeply during recessions or when the market declines. The value of gold will never touch zero, and this has somehow kept investors’ hopes while putting their money on it.
Taking Bitcoin into context now. Bitcoin was launched in response to the economic recession of 2008. Not many people had heard of it then, but as the asset class jumped to the price tag of $0.09 in less than a year, many investors started pulling in. It is no doubt that Bitcoin prices have been a bit volatile in the short term.
For instance, the Bitcoin price rose by over 1200% in the mid of 2011 and also suffered a correction during the same year. The first recession that Bitcoin faced as an asset class was the 2020 pandemic. Surprisingly, Bitcoin grew by over 800% during the pandemic and became a coveted investment while the world markets fell. We need to definitely call Bitcoin the digital gold because of the returns it has provided over the years.
Bitcoin vs. Gold: Which Asset Should we Invest in?
We can differentiate Bitcoin and gold on several parameters as they serve different purposes and have different historical events. The history of gold dates back to more than four thousand years, but Bitcoin is still a beginner with just 12 to 13 years of history. Even with such a huge difference in the time period being an asset class, Bitcoin has come up to the level of competing with gold and even being called digital gold.
Inflation hedge
Since the inception of cryptocurrencies, they have been popular as a hedge against inflation, especially Bitcoin. Gold has also been considered a hedge for investment as the recession has mostly marked a growth period for the asset class. This is because investors, considering gold a safe haven investment, put all their money into it.
The 2000s recession was a growth period for gold as it saw a steady increase in price while the stock market plunged into an economic crisis. Gold rose by over 28% and set new targets for the next fiscal year, even during the pandemic.
However, Bitcoin has stolen the starlight from gold as it has proven to be a better inflation hedge than the precious metal. Experts suggest that the interdependency of gold and the printing of money has affected gold as an asset class. “Now that real estate prices are off the charts and gold is inaccessible to the average American, crypto has become part of that inflationary hedge mix,” says an expert, Kline, who supports Bitcoin as the digital gold.
Performing Asset
Crypto investments are easy to manage compared to gold since there is no storage requirement, and the blockchain network is much more secure than the gold vaults and banks. Bitcoin has risen as an asset class because of the steady overall growth in its value. At its peak in 2021, Bitcoin touched the $68,000 mark. It is being speculated to cross $100,000, despite the crypto winter – meaning it shall be a better option for an inflation hedge than gold.
It is also notable to mention here that, like gold, Bitcoin is limited in supply. Bitcoin’s supply is fixed at 21 million, and the last bitcoin won’t be mined until 2140. Bitcoin is touted to be one of the top-performing assets by 2024, ahead of some of the biggest names on the global scene.
Moreover, you can use Bitcoin to pay for your shopping sprees and maybe buy a Bugatti next if Bitcoin prices hit the jackpot. Gold, on the other hand, remains a barren asset that’s precious but lacks use cases (except jewelry and gold bars, of course).
Bitcoin vs. Gold: Better Investment?
The primary question that comes to mind after all the discussion is which is better Bitcoin vs. Gold. Cryptocurrency has been in the limelight for some time now, and even after some controversial statements running around the internet, crypto investments have performed very well.
As compared to the 21.84% rise in the prices of gold over the last two years, Bitcoin has been a better performer, with over a 300% increase. Bitcoin as an asset class has also proven to put up a good fight against inflation. Speculations suggest that more than 50 thousand metric tonnes of gold is still under the ground, and in case of a price increase, miners will correct the increase with more supply added to the market. Bitcoin as an asset class has a limited supply and thus will increase in price even more, when the demand increases.
With the Morgans & Fargos and Teslas & Microstrategys investing billions in Bitcoin, it’s necessary we feature Bitcoin investment as one worth considering, especially for the long-term. Bitcoin has performed better than gold in terms of money retention and provided more value to investments.
Risks in crypto investments are also getting significantly lowered with more security in the blockchain network and people entering the digital market. Considering Bitcoin as digital gold is still less than what value it holds, but it is important to break the myth that gold is the only inflation hedge.
And don’t you think it prudent to get hold of your bitcoins before it becomes a statement asset for everyone to own?