Is Cryptocurrency a Digital Gold?

By  //  August 19, 2022

Undoubtedly, cryptocurrency is growing in popularity. Vast Bank in the US has teamed up with Coinbase to make it possible for consumers to conduct bitcoin transactions through their bank accounts in response to client demand.

We have observed a top cryptocurrency exchange working with a significant cloud ERP vendor for digital accounting solutions. I have a strong impression that cryptocurrencies will eventually play an influential role in both our lives and the global financial system.

Investors often wonder, “Is it comparable?” when evaluating a new asset class to a traditional one. This essay will examine several elements of bitcoin and gold to assist in answering the frequently asked issue of how these two assets compare to one another. As precious as gold, cryptocurrency tend to generate profit, therefore there are articles that show how to calculate bitcoin profit.

Gold as a medium of exchange

Due to its scarcity, gold has also performed a variety of roles in the American economy. One of them was the gold standard. President Nixon ended the practice of fixing the dollar’s value to a precise quantity of gold in 1971 after it had been in place for many years.

Gold is no longer used as currency nowadays. However, it can also be utilized in other fields like electronics, dentistry, and even aerospace. Instead, it is used for jewelry and as a haven in the form of bullion and gold coins. 

Another sign of the health of our nation is the price of gold. Typically, gold prices drop or remain stable during an expansionary phase. On the other hand, the cost of gold increases during recessions. Gold is still an asset that has the potential to grow since it can withstand the test of time.

How about Bitcoin

To have money that is not tied to any bank or government, Bitcoin was developed in 2008. This concept was inspired by the results of excessive centralization. At first, the notion of developing a new decentralized currency appeared unrealistic, but history has shown us that it is possible.

Bitcoin was worth very little in the start, but then interest in the currency increased when it attained equality with the dollar on February 9, 2011.

Between 2011 and the end of 2015, bitcoin went from $4.60 to $426, a growth of over 9,000%, based on an assessment of prices using Cointelegraph data. 

The volatility of cryptocurrencies like bitcoin, however, is one of their major drawbacks. Bitcoin is a high-risk asset since it frequently experiences daily variations of double digits. Existence and with all the other crypto assets already in use, most experts agree that bitcoin is here to remain.

A currency must induce confidence

Everything will be great if a government keeps people confident in its currency. And as we have painfully witnessed, when a nation’s currency loses faith, the economy and currency collapse, frequently with disastrous consequences for the populace.

We remain sure that the digital number on our bank statement is valuable despite living in a cashless environment where the use of notes and money is rapidly vanishing. In that sense, most of the currency is now digital. Cryptocurrency and digital currency, however, are not the same thing. 

Digital currency is merely a national fiat currency that has been issued and is under the supervision of a central bank as legal tender. On the other hand, cryptocurrency is typically created secretly in a blockchain network that is securely encrypted, and the value is solely determined by supply and demand. However, gold is mined, and the price is determined by supply and demand.

Because they are both rare, gold and bitcoin are both valuable. There may be more gold on Earth than we realize, but there can only be twenty-one million Bitcoins. On the other hand, no one is certain how many US dollars will ever exist. 

Conclusion: Gold vs Bitcoin

Gold and bitcoin both are valued as they are both uncommon. Although there may be more gold than we realize on the planet, there is a limit of twenty-one million Bitcoins. However, no one can predict the exact number of US dollars that will ever exist. 

Let us compare the following criteria:

 Gold and bitcoin are both exchangeable for goods and services.

Bitcoin may be divided down to 1 Satoshi, which equals 1/100,000,000 bitcoin, while gold can be divided into half or quarter ounces.

Bitcoin is up for debate as a store of value. A store of value typically refers to a resource you seek out in times of financial difficulty since it has value on its own. Although Bitcoin has previously served this purpose, its conduct during the present crisis has been more akin to the stock market. Numerous bitcoin detractors also contend that because it is intangible, bitcoin has no fundamental worth.