Comparing Bitcoin to Gold

It appears to be the ideal opportunity for crypto traders to declare, “I told you so,” and invest more money into the most popular cryptocurrency, congratulating it on its victory. Bitcoin has begun 2021 with a new all-time high above $34,000 (£24,850, €27,724), and analysts are optimistic about the cryptocurrency’s continued good performance in the coming year and beyond.

Bitcoin’s worth has tripled in 2020, demonstrating consistent growth even while the stock market was severely impacted by the Covid-19 outbreak. With the US dollar declining, Bitcoin and other famous cryptocurrencies are rising in popularity as traditional investors seek to diversify their portfolios and improve their returns.

The increased interest of institutional investors is also supporting Bitcoin’s mainstream adoption. PayPal (PYPL), the world’s largest payment processor, has already accepted Bitcoin, and Rick Rieder, BlackRock’s chief investment officer of global fixed income, has even suggested that Bitcoin may eventually replace gold.

JPMorgan analysts agree, stating that institutional investors’ acceptance of Bitcoin has only recently begun and that the price of gold will suffer as a result in the coming years.

Today, we’ll take a closer look at the two popular assets, compare them, and hopefully help you make the best decision possible on how to trade gold and Bitcoin.

Gold – A Safe Haven Asset

Gold has existed for millennia. People respect gold because it is a proven source of security, but Bitcoin has yet to be tested during a significant financial catastrophe such as the Great Recession.

Gold is a well-known asset that is regularly employed by financial professionals. “Central banks, significant governmental organizations, pension funds, and astute family offices will always have an allocation to gold,” says Edward Karr, the company’s founder (ticker: USAU).

Why invest in gold? Some investors regard gold as a form of financial insurance. People frequently flock to gold when there is concern about a country’s currency or an economic collapse since it benefits in times of crisis.

In the international monetary system, gold has always played a significant role. Around 550 BC, King Croesus of Lydia (which is now part of Turkey) ordered the first gold coins to be produced. Before the introduction of paper money, they were used as currency in numerous countries.

“Gold has over a thousand years of history on its side and isn’t going anywhere, so it’s really safe,” explains Simpler Trading founder John Carter.

While gold prices have fluctuated like equities in the near term, the value of the precious metal has stayed constant over time. Because we’re living in a period of high market volatility, it may make sense to allocate a portion of your portfolio to gold.

Gold can gain from inflation, making it an excellent inflation hedge. When prices rise, fiat currencies lose value, but gold gains value as investors place their money in the precious metal to protect their purchasing power.

Gold Price Trend

The Gold Price grows by 2.19 percent in just 30 days, and by 0.19 percent in just 24 hours. The gold price is currently 1,794.63 USD per ounce as of the first week of September 2021.

However, because gold does not pay interest or dividends, some may question if it is a worthwhile investment.

“When compared to other asset classes like real estate (revenue from rental properties) or equities (income from dividends), gold does not give any type of recurrent income,” says Ricardo Pina, founder, and CEO of The Modest Wallet.

Key Characteristics of Gold

The following are the key characteristics of Gold:

  • Symbolic Value – Gold has held a special place of actual and symbolic importance for humans from ancient civilisation, from the Egyptians to the Inca. It is seen as a symbol of Wealth, Goodness, Wisdom, Power, and Eternity, among other things. In addition, gold has been used as a medium of commerce, a store of wealth, and as precious jewelry and other artifacts. Most major currencies were convertible into gold until the early 1970s. It is seen as a protective asset against inflation and serves as an investment and a store of value.
  • Inflation Hedge – Many gold supporters argue that it is a solid hedge against rising costs. However, the facts contradict this assertion. In many cases, gold is a greater hedge against a financial catastrophe than it is against inflation. Gold prices tend to climb during times of crisis. During periods of severe inflation, however, this is not always the case. If a financial crisis or recession is on the horizon, it can be a good idea to invest in gold. If the economy is experiencing excessive inflation, though, it may be prudent to refrain.
  • Centralized – While gold has been acknowledged as a money and a store of value for thousands of years, it has a long history in the financial system. Gold is utilized as a medium of exchange and is held by central banks. Federal agencies govern the buying and selling of gold. The SEC’s legal role is determined by the form of investment; while it does not control bullion directly, it does regulate alternative gold investments such as options, gold ETFs, and gold stocks.
  • Rarity – Gold’s shiny and metallic properties, relative scarcity, and complexity of extraction have all contributed to its status as a desirable commodity. There are currently 187,000 metric tons of historical production and 57,000 metric tons of subterranean reserves.
  • Other Various Application – Aside from its monetary and symbolic worth, gold has a wide range of applications. It’s utilized in electronics, electrical wiring, dentistry, medical, radiation shielding, and glass coloring, among other things.

What is the Total Supply of Gold?

According to the most recent estimates, approximately 197,576 tons of gold have been mined throughout history, with approximately two-thirds of that amount extracted since 1950. And, because gold is practically indestructible, almost all of it is still around in some form or another. If every ounce of this gold was placed next to each other, the resulting cube of pure gold would only be 21 meters long on each side.

The total supply of gold in the world was 4,490 tons in 2018 and is expected to be 4,533 tons in 2023. Gold is a valuable precious metal that is utilized as an investment and in jewelry all over the world.

Global gold mining contributes about 2,500-3,000 tons to the overall above-ground gold supply per year. While gold production has been increasing in recent years, it is expected to plateau in the next years.

In Q1’21, gold mining costs rose for the second quarter in a row, with the global average All-in Sustaining Cost (AISC) increasing by 5% q-o-q to US$1,048/oz, the highest level since Q2’13. Between Q4’20 and Q1’21, this, combined with a 4% decline in the average quarterly gold price, resulted in a 14 percent drop in AISC margins (gold price minus AISC). Despite this drop, industry margins remained healthy, with only the top 4% of the most expensive mines having an AISC higher than the gold price during the quarter.

Who is buying Gold?

Billionaires

A number of billionaires have been quietly acquiring gold over any other sort of investment opportunity that their riches allow them access to since late 2015 and early 2016. Although only a fraction of a percent of the world’s wealth is invested in gold, it tends to outperform other assets, which is why a number of billionaire investors have been drawn to the safe haven potential that it always offers in times of economic and political instability.

Investors

Gold is the most popular precious metal for investment out of all the precious metals. Gold is commonly purchased by investors as a means of risk diversification, particularly through the use of futures contracts and derivatives. Commodities, particularly gold, are increasingly being viewed as an investment class to which capital should be committed. In reality, as of 2019, SPDR Gold Trust was one of the largest ETFs in the United States and the world’s largest holder of gold bullion.

Collectors

If your goal is to acquire beautiful coins with bullion value, buying gold is one of the greatest options. The gold in them will always be worth bullion value, and the bullion is kept in an American coin that is almost a century old. Because of their scarcity, these two variables raise the likelihood that their value will rise. As a result, these coins will only become rarer with time, and the premiums paid for them are insignificant in comparison to their rarity and potential.

Gold Lover

Crysophilist is a term used to describe someone who enjoys gold. Why are there individuals like this? Because gold is lustrous, does not corrode, is infinitely malleable, and can be molded, cast, and made into practically any shape, it is a popular choice for jewelry. It’s the color of the sun, which was regarded as a god and hence had god-like significance. It’s really uncommon.

Gold Disadvantages and Risks

There are also some disadvantages to consider. “The costs of keeping huge amounts of the precious metal can be fairly high, poor liquidity produces large spreads, and it can be difficult to verify the purity and validity of the gold source in some situations,” Pina explains.

While this may appear to be a disadvantage, Carter believes that “the point of gold isn’t money.” “It’s to protect riches amid unpredictable times.”

Theft is another danger. If you’re not careful, someone could steal your gold. A purchase of gold, unlike stocks and bonds, is not an investment in the growth of a firm. There are no dividends or interest paid on actual gold. Finally, it’s possible that you’ll have to wait years for gold to appreciate in value.

Finally, experts suggest that gold plays an essential part in the stability of your portfolio as a “buy and hold” investment if you’re seeking a safe-haven asset that is negatively correlated to other assets. It also serves as a capital preserver, inflation hedge, and diversifier. All of these advantages have the potential to provide favorable returns over time.

Gold can be purchased in a variety of ways. Investors can buy actual gold bullion or gold coins, which have a greater entry hurdle, or gold equities or exchange-traded funds, which have a lower barrier of entry.

Introducing Bitcoin – New Digital Gold

By market capitalization, Bitcoin is the most valuable cryptocurrency on the planet. Unlike the stock market, which is available for trading Monday through Friday from 9:30 a.m. to 4:00 p.m. EST, the cryptocurrency exchanges are open 24 hours a day, seven days a week, allowing users to trade Bitcoin and other digital assets at any time.

One of the most distinguishing characteristics of Bitcoin is that it has a finite supply, meaning that there can never be more than 21 million Bitcoins in circulation. Given the fixed volume of the asset, if demand for the cryptocurrency remains strong, the value of Bitcoin will potentially rise — but there is no assurance that this will happen.

“Like gold and other precious metals, Bitcoin’s value is derived in part from its limited supply and increasing customer demand,” explains Edmund McCormack, founder, and CEO of Dchained. However, the truth is that Bitcoin values have been quite volatile. Bitcoin’s price has dropped from about $60,000 in early May to around $32,000 in early June in just over a month. Furthermore, Bitcoin has yet to gain widespread acceptance, leaving investors to wonder how widely digital currencies will be recognized in the future. As a result, there is conjecture as to where the price of Bitcoin will go.

“Bitcoin has been a tremendous speculative asset, and due to Bitcoin’s extreme volatility, its long-term correlation to other portfolio asset classes still needs more time to sort out,” Karr says, noting that the cryptocurrency is an emerging asset class that is just approximately 12 years old. Because Bitcoin has only been on the market for a short time, it does not have the same track record as gold in terms of performance.

Is bitcoin, then, a wise investment? Bitcoin’s enormous price swings may be difficult for the average investor to accept as a volatile and risky asset. This volatility arises from a number of factors, including China’s anti-cryptocurrency crackdown and Elon Musk’s statements about digital assets. Despite these failures, experts believe Bitcoin has the potential to be a valuable asset in your portfolio.

“With its low correlation to gold and the US dollar, Bitcoin offers a way to add more diversity and upside exposure in today’s market,” McCormack says.

The blockchain technology that underpins Bitcoin is another well-known characteristic. This ground-breaking technology is transforming the way we interact with one another. Blockchain functions as a monetary exchange intermediary between individuals, bypassing banks and other financial institutions and enabling a decentralized market.

You can invest in Bitcoin on crypto exchanges like Coinbase (COIN), Binance, Cash App, and others if you’re interested in this new asset class, its decentralization, and transformational technology.

Bitcoin Price Trend

In the last seven days, the price of Bitcoin has dropped by 4.61 percent. In the last 24 hours, the price has risen by 0.36 percent. The price has increased by 0.75 percent in the last hour. BTC is currently valued at $2,323,189.58508. Bitcoin is down 28.27% from its all-time high of $3,238,683.99.

Bitcoin’s supply has a fixed limit of 21 million coins. 18.77 million of these have previously been mined. That means that 83 percent of all Bitcoins ever created have already been distributed.

Key Characteristics of Bitcoin

Here are the key characteristics of Bitcoin:

  • Decentralization – Bitcoin’s decentralization is the first and most important feature. Bitcoin has no central authority, unlike traditional currencies, which are issued and administered by a central authority, which could be the government of a country or any other entity. Bitcoin’s decentralization offers a number of advantages over traditional cash, including immunity from seizure, taxation, and theft.
  • Easy to Transfer – Sending bitcoin is as simple as picking how much to send and where it should go. Simply copy the recipient’s address to your clipboard, then paste it into the send field of the Bitcoin wallet program you’re using to send bitcoin. QR codes can also be used to display bitcoin addresses.
  • Digital Currency – Unlike traditional money, bitcoins are not physically present in the form of notes or coins. It’s also convenient to carry in the phone this way. It’s difficult to be robbed by robbers in the market or at home.
  • Encryption – The “crypto-” in the name refers to the fact that Bitcoin and other blockchain-based cryptocurrencies rely on cryptographic procedures to ensure security and fidelity. Encoding and decoding data is a mathematical and computational discipline known as cryptography. Cryptography technology is used for a variety of objectives, including securing network transactions, managing the formation of new currency units, and verifying the transfer of digital assets and tokens.
  • Portability – This is one area where bitcoin comes out on top. Bitcoin is a virtual currency that can be sent and received from any computer with an internet connection. It also operates fully outside of the financial system, making cross-border payments simple and quick.
  • Transparency – We all know that knowing how much bitcoin a person owns is impossible, but it is clear to everyone on the ledger board how many transactions have been made by which user and who is/are the bitcoin receiver/receivers. As a result, everyone in the bitcoin ecosystem understands the transaction.
  • Non-repudiable – This trait refers to the fact that once bitcoin has been sent, it cannot be returned unless the recipient is ready to do so. It implies there’s no going back; the receiver can’t say he never got any bitcoin. To put it another way, it is difficult to recover Bitcoins once they have been sent unless the recipient chooses to return them in a new transaction.
  • Store of Value – Proponents of Bitcoin have argued that the cryptocurrency is more akin to “digital gold” than basic digital currency since its inception. Many Bitcoin supporters have reinforced this story in recent years. The store of value thesis for Bitcoin claims that it is one of the most secure assets ever created. Bitcoin, according to proponents of the idea, is the finest way to keep capital that will not devalue over time.
  • Supply Limited – Bitcoin’s supply has a fixed limit of 21 million coins. 18.77 million of these have previously been mined. That means that within 12 years of its birth, 83 percent of all Bitcoin that will ever exist has already been put into circulation.

How many Bitcoin Wallets exists?

Here are the statistics on the number of Bitcoin wallet users worldwide from November 2011 to August 15, 2021.

How many Bitcoin wallets are there? At the end of March 2021, Blockchain.com wallets had surpassed 70 million users, making it feasible to purchase Bitcoin. When comparing download stats for the Coinbase, Blockchain Wallet, Crypto.com, BRD, Trust, Luno, Binance, Bitcoin Wallet, Bitcoin Wallet by Bitcoin.com, and Coinbase Wallet applications in 2021, it becomes clear that user numbers for many cryptocurrency apps increased dramatically.

How many people own Bitcoin? Although exact user data for Bitcoin are unavailable, it is anticipated that between 2018 and 2020, the global user base of all cryptocurrencies expanded by over 190 percent. A rise in the number of accounts, as well as advancements in identification, may have contributed to the increase in demographics. More accounts in exchanges and wallets were methodically linked to an individual’s identification, making it easier to determine the minimum user numbers associated with each service provider’s accounts.

Bitcoin Price Volatility

Bitcoin’s volatility has been trending to decrease since April 2021, and the currency’s price appears to be locked in a range of $50,000 to $60,000. Is the current bitcoin market a brief respite between lurches? Is it a long-term trend toward decreasing volatility that will alter people’s perceptions of bitcoin?

The table’s data is derived from separating bitcoin volatility into three categories: high, medium, and low. The volatility of 100 percent or more is considered high. The volatility of 50 percent or more, but less than 100 percent, is considered mid. Volatility below 50% is considered low. The 30-day standard deviation of daily log returns, annualized over 365 days of trading, is used to calculate volatility.

These ranges aren’t completely random. The highest tercile of bitcoin volatility has been above 79 percent since October 2014, while the middle third has started at 51 percent.

This approach of looking at bitcoin volatility reveals a pattern in the length of volatility cycles. Bitcoin volatility cycles tended to be shorter in the first two years on the table, lasting less than 50 days. They became longer from 2016 to 2018, before reverting to shorter cycles in 2019.

Bitcoin’s value has been quite volatile in the past. For example, during a three-month period between October 2017 and January 2018, the price of bitcoin fluctuated by roughly 8%. In the 30-day period ending January 15, 2020, this is more than double the volatility of bitcoin.

Why does Bitcoin fluctuate?

A lot of it has to do with bitcoin’s unpredictability as a currency or store of wealth. Questions about how bitcoin is currently being utilized, as well as unethical trading methods by cryptocurrency exchanges, combine to create a recipe for dramatic price swings. While bitcoin traders don’t mind the volatility, it has attracted a slew of skeptics who regard bitcoin as nothing more than a risky investment. However, some public people have emerged from the woodwork to express their change of heart about bitcoin, indicating a trend toward favorable feelings.

Crypto Bear Market

A bear market occurs when a market’s price decreases for an extended period of time. It usually refers to a situation where stock values have fallen 20% or more from recent highs due to widespread pessimism and poor investor sentiment.

Individual securities or commodities can be considered in a bear market if they experience a 20% or more decline over a sustained period of time—typically two months or more. Bear markets are often associated with declines in an overall market or index like the S&P 500, but individual securities or commodities can also be considered in a bear market if they experience a 20% or more decline over a sustained period of time—typically two months or more. Bear markets can also occur in conjunction with broader economic downturns, such as a recession. Bear markets can be compared with bull markets that are heading upward.

Markets are in bear territory, according to one definition, when equities have fallen by at least 20% from their peak. However, just as a 10% loss is an artificial baseline for a correction, 20% is an arbitrary number. A bear market is also defined as a period in which investors are more risk-averse than risk-seeking. This type of bear market can linger for months or even years as investors avoid risky investments in favor of safe bets.

Causes of a bear market

The most common cause of a bear market is investor anxiety or uncertainty, but there are a variety of other factors at play. While the most recent 2020 bear market was triggered by the global COVID-19 pandemic, other historical causes include extensive investor speculation, irresponsible lending, oil price fluctuations, over-leveraged investing, and more.

A weak or lagging or sluggish economy, collapsing market bubbles, pandemics, wars, geopolitical crises, and significant paradigm shifts in the economy, such as changing to an internet economy, are all elements that may create a bear market. Low employment, low discretionary income, weak productivity, and a reduction in corporate earnings are all symptoms of a weak or faltering economy. Furthermore, any government interference in the economy can set off a bear market.

How to Invest in Bear Market?

Bear markets are undoubtedly frightening for investors, and no one appreciates seeing the value of their portfolios plummet. On the other hand, while stocks are trading at a discount, these can be opportunities to put money to work for the long term.

With that in mind, here are some guidelines to follow while investing in a bear market:

  • Think long term: Making knee-jerk reactions to market swings is one of the worst things you can do in a bear market. Over time, the ordinary investor underperforms the general stock market, and the fundamental reason is because they trade in and out of stock positions too quickly. Although it’s common knowledge that the basic purpose of investing is to buy low and sell high, reacting emotionally to market swings does the exact opposite. Invest in equities that you want to own for the long term, and don’t sell them just because the market is down.
  • Focus on quality: True, companies frequently go out of business when bear markets strike. To put it another way, when the economy is bad, companies that are overleveraged or don’t have any actual competitive advantages suffer the most, but high-quality enterprises outperform. In these unpredictable times, it’s critical to concentrate on companies with strong balance sheets and clear, long-term competitive advantages.
  • Don’t try to catch the bottom: Trying to time the market is almost always a lost proposition. It’s important to remember that you won’t be investing at the bottom of a bear market. Buy stocks because you want to own the company for the long term, even if the stock price drops a little after you purchase it.
  • Build positions over time: This is related to the preceding suggestion. Rather than attempting to time the bottom and investing all of your money at once, a wiser strategy during a bear market is to gradually increase your stock investments over time, even if you believe prices are as low as they will go. If you’re wrong and the stock continues to fall, you’ll be able to profit from the new lower pricing rather than remaining on the sidelines.

What are the risk when buying Bitcoins?

Bitcoin is by far the most popular currency today, but like with any new frontier, there will be challenges. Despite bitcoin’s recent popularity, investing in cryptocurrency has some significant dangers.

With so many individuals racing to invest, it’s critical to understand the concerns that surround this new market. Here are some of the dangers of investing in bitcoin:

  • Young Technology – Cryptocurrency is still a relatively new concept. Bitcoin was created nearly ten years ago and has yet to mature into a viable currency. With so many changes in recent years, it’s impossible to predict how the market will develop.
  • Limited Use – Bitcoin may be a first step toward a new monetary exchange, but few businesses accept it as a legitimate method of payment. A few online retailers, such as Overstock, Newegg, and Monoprix, among others, currently accept bitcoin exchanges. Unfortunately, many businesses do not consider bitcoin to be a real currency.
  • Block Withholding – New bitcoins are made by solving mathematical equations known as “blocks,” which are generated every time a bitcoin exchange goes online. Instead of publishing the new block to the network, a mining pool can use computational power to mine a block and hide it from honest miners. In essence, this is a mechanism for a chosen few to prosper while the rest of the population is left with nothing.
  • Fraud and Cyber theft – In the bitcoin market, there is a considerable degree of fraud. Bitcoins are being traded online by buyers and sellers, however due to their popularity, some of these exchanges may be fraudulent. Unsuspecting investors being scammed out of their bitcoins in fraudulent exchanges, according to the Consumer Financial Protection Bureau and the Securities and Exchange Commission. For investors, this lack of security poses a significant risk. While technologies have been developed to address these issues, security remains a major concern.
  • Volatile And Fluctuating Market – Bitcoin’s value fluctuates on a daily basis. One bitcoin was valued $6,461.01 on November 6, 2018. On December 17, 2017, the price of a bitcoin reached $20,000 if you bought one. Buyers were unable to sell their investment for more than $14,626 days later, on the 24th. The bitcoin market is in a perpetual state of flux. There’s no way of knowing if you’ll get a return on your investment in such a volatile market. Keep a close check on the market to avoid a huge loss. Make tiny investments; they will pay you in the long run.

Who buys Bitcoin?

Random People in the Internet

Previously when Bitcoin is not yet known to many, it is only bought by anonymous and weird people who wanted to privately buy something off the internet, licit and illicit goods, such as drugs.

Billionaires

The fortune of 12 crypto billionaires was projected to be worth $37.3 billion by Forbes on March 5 for the annual World’s Billionaires list, while Bitcoin cost $49,207.77 each. Bitcoin is currently priced at $34,113.08, yet its combined net worth has risen to $39.5 billion.

Retail Investors

The buying frenzy that began in March 2020, when blockchain data revealed that more wealthy investors were buying bitcoin in enormous blocks costing more than $30 million apiece, intensified in October, and peaked in early February 2021, when bitcoin was trading at more over $33,000.

Institutional Investors

While many of these retail investors had previously seen prices around $30,000 as a sell signal, bitcoin’s meteoric rise in the spring made that price range look like a relative bargain to them by May 2021. “Seeing bitcoin’s price rise above $64,000 in April instilled confidence among institutional investors, and by mid-May, buying back in at around $35,000 felt appealing and didn’t feel like a lonely trade,” Gradwell says.

Furthermore, after the May crash, bitcoin values remained quite stable for the next two months, fluctuating between $30,000 and $40,000. Gradwell adds that institutional investors found this encouraging and haven’t stopped adding to their holdings since they began rebuying in May.

Bitcoin VS Gold

Gold has dominated the safe-haven asset market for hundreds of years, but bitcoin was created just over a decade ago and has only recently gained popular acceptance. Today, we’ll look at why bitcoin is better than gold by comparing the two investment options:

Security

Because of its encrypted, decentralized architecture and sophisticated algorithms, Bitcoin is almost certainly incorruptible. Gold, on the other hand, is constantly vulnerable to fraud and theft.

Supply

To date, around 244,000 metric tons of gold have been discovered (187,000 metric tons historically produced plus current underground reserves of 57,000 metric tons). Only three countries have supplied the majority of the gold: China, Australia, and South Africa. In 2016, the United States placed fourth in terms of gold production. All of the gold unearthed so far would fit inside a cube with a diameter of 28 meters on all sides.

While the circulating supply of Bitcoin will remain at 21 million forever.

Uses and Applications

Gold has long been utilized in a variety of applications, ranging from high-end jewelry to specific applications in dentistry, electronics, and other fields. This will continue to be a source of demand in the near future.

Bitcoin, on the other hand, has raised awareness of blockchain technology and demonstrated its utility for purposes other than investing. It’s also a tool for folks who don’t have access to financial infrastructure or traditional financing options like credit.

Volatility

Bitcoin is too unpredictable to be regarded as a real safe-haven investment, according to gold bugs, and cryptocurrencies have a weak case as repositories of value. Long-term research shows that Bitcoin and gold have only sporadic relationships. The coronavirus outbreak, on the other hand, has pushed a tightening of the gold/Bitcoin link.

Gold, on the other hand, has a lower level of volatility, yet it was still quite unpredictable in 2020.

Energy Consumption

According to Cambridge University, operating and maintaining the Bitcoin blockchain and transactions needs enormous amounts of energy, about equivalent to that consumed by a country with a population of over 200 million people, roughly three times that of the United Kingdom.

According to the University of Cambridge Bitcoin Electricity Consumption Index, the worldwide bitcoin network presently consumes over 80 terawatt-hours of electricity per year, roughly equivalent to the yearly output of 23 coal-fired power plants, or near to what is consumed.

According to “Gold.org,” 3500 tons of gold were extracted in 2020, and 1300 tons of gold were recycled. According to Dell, each kilogram of mined gold produces 20 tons of CO2 and consumes 48.6 MWh of energy, however, due to data restrictions, they ignore the energy required for further processing of the gold. According to a new study from DePaul University, this figure should be closer to 35 tons of CO2 for jewelry, which accounts for about half of global gold demand. Because it is anticipated that refinement consumes a comparable amount of energy as recycling, each gram of gold used in jewelry requires a total of 79.9 MWh for mining and refinement. Recycled gold emits 37 tons of CO2 and consumes 31.3 MWh of energy every kilogram. If we adopt the DePaul study’s statistics and account for 1750 tons of jewelry, the gold mining sector will use 265 TWh of energy and emit 145 Mt of CO2 in 2020.

Natural processes produce gold. Once a unit of gold has been mined and extracted, it consumes no additional energy and can be traded or utilized as a store of wealth without harming the environment.

Speed & Scalability

The larger the Bitcoin network becomes, the slower it is likely to become for a variety of reasons, including congestion and larger block sizes. When Bitcoin is busy, it might take days for transactions to be confirmed: 5 days in 2018. Furthermore, Bitcoin has only been able to handle a maximum of 7 transactions per second since its inception. Although the Lightning Network is intended to reduce transaction processing times, fees remain an issue because each transaction may be subject to several fees.

While Glint has enabled gold to be used in payments, transactions are quick – within 200ms, and this can be maintained regardless of transaction volume. As a result, gold ownership can be transferred from one Glint wallet to another.

Regulation

All cryptocurrencies are expected to be regulated more heavily in the future. The SEC recently filed a lawsuit against Ripple, and Janet Yellen has previously spoken about the need to regulate Bitcoin to prevent illicit financing.

While gold has been acknowledged as money and a store of value for thousands of years, it has a long history in the financial system. Gold is utilized as a medium of exchange and is held by central banks. Federal agencies highly regulates the buying and selling of gold. The SEC’s legal role is determined by the form of investment; while it does not control bullion directly, it does regulate alternative gold investments such as options, gold ETFs, and gold stocks.

Unit of Measurement

In the Bitcoin system, a satoshi is the smallest unit of measurement that can be used. It is the smallest fraction that a Bitcoin may be divided into. A bitcoin is divided into 100,000,000 “cents,” or satoshis, in the same way as a euro is divided into 100 cents. Allows for up to eight decimal place balances to be reflected. As a result, the smallest fraction of a bitcoin is 0,00000001.

In the case of gold, the idea is that dividing 1kg of gold into smaller units is incredibly expensive. You’ll have to melt it and reform it, which will be incredibly costly. Although gold is generally measured in grams, the troy ounce is the most frequent unit of measurement for gold bullion coins.

Troy ounces are the most frequent unit of measurement for gold, but grams are also often employed in a world where the metric system is gaining traction. Carats or fineness are units of measurement for gold purity.

Store of Value

Proponents of Bitcoin have argued that the cryptocurrency is more akin to “digital gold” than basic digital currency since its inception. Many Bitcoin supporters have reinforced this story in recent years.

The store of value thesis for Bitcoin claims that it is one of the most secure assets ever created. Bitcoin, according to proponents of the idea, is the finest way to keep capital that will not devalue over time.

Bitcoin is well-known for its extreme volatility. Many people consider an asset that can lose 20% of its value in a day to be a store of value, which may sound counterintuitive. Despite its numerous losses, it has been the best performing asset class to date.

While gold, silver, and other precious metals have been employed as currencies in numerous economies throughout history because of their ability to store value, relative ease of transit, and ease of exchanging them for alternative amounts. Up until 1971, the United States was on a gold standard, which meant that dollars could be exchanged for a particular weight of gold.

For example, gold and other precious metals are valuable stores of value because they provide use over time and do not depreciate in value. Because they provide income while keeping value, interest-bearing assets qualify as stores of wealth as well.

Price Performance

Bitcoin has had one of the most turbulent trading histories among asset classes. The value of a single Bitcoin grew from roughly $0.0008 to $0.08 in 2010, marking the cryptocurrency’s first price increase. Since then, it has been through multiple rallies and crashes. Some have compared Bitcoin (and its price changes) to the Beanie Baby craze of the 1990s, while others have made comparisons between Bitcoin and the 17th century Dutch Tulipmania.

Here’s Bitcoin Price Performance as per Barchart.com.

  • 2-Year                   +1,062.16%
  • 3-Year                   +1,387.67%
  • 5-Year                   +7,725.00%
  • 10-Year                 +99,999.99%

In contrast, the global average annual return on gold and other assets from 1971 to 2019 (49 years). Between January 1971 and December 2019, gold had an average annual return of 10.61 percent, trailing only commodities, which had an average annual return of 10.69 percent.

Price Forecast

In ten years, how much will bitcoin be worth? Bitcoin price forecasts range from 100,000 to one million dollars per bitcoin. However, some sources claim that it could fluctuate and return to zero.

Looking further ahead in the gold forecast, even the gold price prediction chart for the next ten years appears promising for the asset, as the general gold prediction remains that its value will only rise, especially given the impending financial crisis, as we can see from what happened in the ten years after 2008. According to some estimates, gold might hit $10,000 by 2030.

Market Manipulation

In all cases of “dump and pump” events involving Bitcoin or other cryptocurrencies, spot volumes rise above the average seen on exchanges. The price of cryptocurrency drops or rises rapidly as a result of the occurrences.

After investing in cryptocurrencies, investors may see huge trades on exchanges with “thin books,” or exchanges with little liquidity, where a large amount of cryptocurrency is completed. This is a sign that market manipulation is taking place in order for investors to profit quickly. By selling large amounts of assets on the spot market, manipulators take advantage of the thin order book.

Federal agencies govern the buying and selling of gold. The SEC’s legal role is determined by the form of investment; while it does not control bullion directly, it does regulate alternative gold investments such as options, gold ETFs, and gold stocks. For example, the SEC permitted options trading on the SPDR Gold Trust in 2008, whereas the CFTC approved futures trading on it.

Verification

Bitcoin transactions are digitally signed messages, similar to email, that are broadcast to the entire Bitcoin network for verification. Information about transactions is open to the public and may be found on the ‘blockchain,’ a digital ledger. As a result, verifying Bitcoin is incredibly simple.

Many individuals have trouble determining if something is gold or not. Fake gold can be found in the shape of coins or bullions, and it can include variable amounts of gold or gold of a lower quality than declared. There is usually no need to be concerned about authenticity if purchased through a bank or a licensed precious metal merchant. Bargain purchases from less trustworthy merchants on an auction platform or at a bazaar, on the other hand, are a different story, and investors should investigate further and verify authenticity.

User Base

At the end of March 2021, Blockchain.com wallets, which allow users to purchase Bitcoin, had surpassed 70-80 million users. When comparing download stats from the Coinbase, Blockchain Wallet, Crypto.com, and other Coinbase Wallet apps, it becomes clear that user numbers for several cryptocurrency apps expanded dramatically in 2021.

Although exact user data for Bitcoin are unavailable, it is anticipated that between 2018 and 2020, the global user base of all cryptocurrencies expanded by over 190 percent. A rise in the number of accounts, as well as advancements in identification, may have contributed to the increase in demographics. More accounts in exchanges and wallets were methodically linked to an individual’s identification, making it easier to determine the minimum user numbers associated with each service provider’s accounts.

The gold market, on the other hand, is notoriously opaque. There are very few solid numbers on private gold ownership that have been documented. It’s difficult to quantify the global number of individuals who possess gold, but according to a recent survey, 10.8% of The American Population Owns Gold.

Mining/Production Cost

To summarize, mining a bitcoin presently costs between $7,000 and $11,000 USD. An ASIC miner’s lifetime cost to mine one bitcoin is on average $15,000-$19,000 USD. Bitcoin mining is still quite profitable at $56,000 per bitcoin. However, because hardware prices have doubled in the last few months, the entrance price for miners has increased significantly.

The Fekola Mine is estimated to produce between 530,000 and 560,000 ounces of gold in full-year 2021, with cash operating costs of $405 to $445 per ounce and AISC of $745 to $785 per ounce.

See below a Bitcoin vs Gold chart:

CriteriaBitcoinGold
SecurityIncorruptible  Subject to Fraud and Theft
Supply20 Million bitcoin supply forever  187,000 metric tons historically produced plus current underground reserves of 57,000 metric tons
Uses and ApplicationsStore of ValueJewelry, Dentistry, Electronics, Food, Construction, and more.  
VolatilityExtremeLimited
Energy Consumption80 terawatt-hours of electricity annually265 terawatt-hours of energy used and 145 Mt of CO2 produced.
Speed & ScalabilityWhen Bitcoin is busy, it might take days for transactions to be confirmed: 5 days in 2018. Furthermore, Bitcoin has only been able to handle a maximum of 7 transactions per second since its inception.  Gold is difficult and very slow to transfer but is fast when purchasing.
RegulationDecentralized Blockchain   Some attempts by Government to regulate the coin, but so far not very successful.Buying and Selling activities are highly regulated by SEC and Federal Agencies  
Unit of MeasurementSatoshi/s         Kilograms or Ounces
Store of ValueThe store of value thesis for Bitcoin claims that it is one of the most secure assets ever created. Bitcoin, according to proponents of the idea, is the finest way to keep capital that will not devalue over time.Gold and other precious metals are valuable repositories of value because they provide utility over time and do not depreciate in value.
Price Performance2-Year                   +1,062.16% 3-Year                   +1,387.67% 5-Year                   +7,725.00% 10-Year                 +99,999.99%  Between January 1971 and December 2019, gold had an average annual return of 10.61 percent.
Price ForecastBitcoin price prediction ranges between 100,000 – 1M dollars per Bitcoin. But some sources say it could fluctuate and go back to zero.Gold can reach up to $10,000 by 2030.
Market ManipulationIn all cases of “dump and pump” events involving Bitcoin or other cryptocurrencies, spot volumes rise above the average seen on exchanges. The price of cryptocurrency drops or rises rapidly as a result of the occurrences.Many gold buyers feel the gold market is routinely managed, and a few financial firms have previously been punished for attempting to influence or manipulate gold prices.
Verification        Very easyDifficult
User Base80 million bitcoin usersWe estimated between 10%-20% of the world’s population possess gold.
Mining/Production CostIn summary, it currently costs between $7,000-$11,000 to mine a bitcoin.  $405 – $445 per ounce and AISC of between $745 – $785 per ounce.
AlternativesLitecoin, Ethereum, CardanoSilver, Platinum, other metals
AdvantagesAnonymous and Private Payment Freedom Low/Minimal Fees Fewer risks for merchants It’s fast Central governments can’t take it away People can’t steal your payment information from merchants Non-InflationaryHedge against inflation Liquidity Diversification Holds value for a long period of time  
DisadvantagesDegree of acceptance Volatility Ongoing development Deflationary Lack of recourse Money Laundering Black MarketDifficult to store Difficult to transport Physical Gold Bond Additional Costs to buying Gold Possibility of Fraud and Scam Price correction can lead to losses  

Should You Invest in Gold or Bitcoin?

It’s sensible to explore if a new asset class like Bitcoin is worth investing in as we progress toward a paperless world and digital currencies become more ubiquitous.

When to Invest in Gold?

Gold investment is a good idea:

  • when there is a lack of confidence in the stock market
  • when banks are unstable
  • when the political environment is unpredictable
  • when other types of investments have the potential to lose value

It’s also a smart option as a hedge in a private investment portfolio after certain personal circumstances, such as a windfall.

If perfect foresight were possible, investors would choose gold ahead of situations that would erode investor confidence, such as political unrest or financial disasters. Even if you lack flawless foresight, keeping a close eye on current events and economic trends, as well as a thorough understanding of the market, might lead you to the appropriate decision.

Investing in gold, whether real gold or gold-related instruments, is a difficult decision that should not be taken lightly. If you do decide to acquire actual gold, make sure you deal with a reputable dealer. If you want to acquire gold for your retirement account, you’ll need to work with a broker and a custodian.

Financial experts recommend that you keep gold to a small percentage of your total assets as a general rule of thumb. This is thought to be sound counsel because it works as a safety net. If all of your other equities go down in value in a crash, your gold should rise in value, preventing you from losing everything. However, keep in mind that nothing is guaranteed, so proceed with caution while purchasing this valuable metal.

When to Invest in Bitcoin?

Investing in an entity at a cheap price with the expectation of a future price increase is considered a savvy investment approach. When comparing Bitcoin’s price since April, it’s fair to say it’s been on the decline.

Investing in Bitcoin today might not be the wisest idea, given the recent significant and exciting spike in the current price. Many analysts feel that Bitcoin will crash in a few weeks as a plausible consequence due to the extreme volatility.

You can still invest in Bitcoin despite the fact that all investments are a hazard. This is due to the fact that, while it is not the best time to invest, it is also not the worst. Industry watchers also predict that Bitcoin will exceed $100,000 by the end of 2021. However, since predictions can go either way, you should be prepared if the market crashes and fails to provide you with the returns you desire.

Conclusion

With all the points explained here, it is obvious that Bitcoin shows way more features and advantages than Gold. However, it is still not widely accepted for payment and is also subject to few risks. But overall, Bitcoin offers a legit alternative if you are looking for a new and modern way to store value than with Gold which basically dates back to the stone age. It’s still under continuous development and is worth considering adding to your portfolio.

About Savy Fox

SavyFox is an investment blog that writes about various interesting investment topics and shares research and opinions with respect to Stocks, Peer 2 Peer Lending, or Crypto Currency investment opportunities.

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