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Gold Vs Bitcoin Demystify


The series of events in the world economy has made many economists predict of life threatening recession to the economy. This has brought grave concerns to investors, especially those with investments in the stock market to look for viable more stable safe havens for their investments. The outcome of which has made many resort to traditional options like gold. This is greatly due to its stability as against stock volatility.


On the other hand, another group of investors have also looked at a more new alternative which is fast challenging the “gold safe-haven”, Bitcoin. Being the leader among the cryptocurrency, the launch of Bitcoin in 2009 has ushered in a whole new era of the use of digital currencies. However, it now depends on the investor to determine which of these options to choose as a safe haven for their investment in these changing times. That being said, we will now attempt to compare the features of these two options in determining which poses a safer haven option for the investment of investors. This is the essence of this guide.

Gold as a Safe Haven Option

When it comes to choosing gold as a safe haven option, there are many factors in favor of the metal as a storage facility against future economic meltdowns and recession. Firstly, it is a highly valuable raw material for the creation of consumer related goods such as electronics and even jewelry. In addition to this it, its supply is scarce and disproportionately low as against its demand. This is quite expected as it takes much time and effort to mine and process this precious metal from the earth crust. Also, it is not under the influence of any company so that it cannot issue new shares nor can it be printed as currency prints under the control of federal banks.


Another obvious reason in favor of the metal is that its value tends to remain stable with little or no fluctuations despite changes in the prices of stocks in the exchange market. This lack of correlation with the stock market makes it highly dependable as a sure safe haven for investor’s investments. The fact that the asset remains static while others decline makes it a very useful hedge in protection of one’s investment. Also, as more people begin to demand for it, as they leave the purchases of stock behind, its price also begins to rise.

The Case for Bitcoin as a Safe Haven Option
Bitcoin on the other hand, shares quite similar features in terms of its stability as a safe haven option for investors’ investment as its counterpart, gold. Bitcoin, being a blockchain-based cryptocurrency has in its few years of existence been referred by many as the “digital gold” of the century. This stems up from the fact that it has a very weak relationship with other assets, especially stocks. For instance, its price has risen significantly within few years, from $430 as at 2013 to a far surpassing $9000 as at today, June 2020. This significant rise in value has made it quite commendable by investors as both a quality asset worth investing in and a safe haven for future returns on investment.

Besides the supply of Bitcoin, just like gold is highly limited in supply. The pseudonymous creator of Bitcoin, Satoshi Nakamoto made it quite clear in writing that Bitcoin has been designed in such a way that the total supply cannot exceed 21 million tokens. Being a decentralized cryptocurrency, in that it is not under the control of any federal bank or government, it is collectively created through “mining” by the computing powers of a individuals and groups of people who work to verify the transactions taking place on the Bitcoin network. In return, they rewarded for their effort, time and computing power with Bitcoins. Also, the fear of the market being flooded with the creation of so much Bitcoins should not be of one’s bother as this has been taken care of by the Bitcoin protocol which periodically halves these Bitcoin rewards so that the final Bitcoin would not be issued until around about the year 2140.


Gold Vs Bitcoin Demystified
From pristine times, Gold has always been with man as a medium of exchange in transactions. However, Bitcoin on the other hand in just few years of existence is fast becoming a more viable option. We will now attempt to compare both investment options, in terms of their hedging properties which make one favorable over the other as a safe option for investors. These include;

 In terms of Volatility
Gold from its discovery has been quite a stable asset. This is due to the fact that its value does not fluctuate on the basis of changes or fluctuations in the prices of other assets, especially stocks. On the other, Bitcoin’s constantly rapid volatility is quite a major concern for investors. For instance, the price history of Bitcoin for the past two years is an evidence to buttress this fact; around the beginning of 2018, the price of one Bitcoin was $20,000 but just about a year later, it had drastically reduced to around $4,000. This is not quite encouraging for investors as such, making it being a subject of debate as to being a safe haven for their investments.

 In terms of Its Rarity
In this case, both Bitcoin and gold are very scarce in supply. The halving of Bitcoin by the pseudonymous creator made it possible that its supply cannot exceed 21 million tokens, which is expected to reach that mark around 2140. Gold on the other hand, is mined deep from the earth crust, and being a commodity of nature, its supply is highly limited.


 In terms of its transparency, Safety, Legality
Overtime, gold has established a track record of a sordid trading system, as it is quite known for its ease of trading, weighing and tracking. This makes it highly transparent and difficult to be easily stolen or faked by anyone. On the other hand, Bitcoin thanks to its decentralized system and complicate algorithms is quite difficult to corrupt as well.


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