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Bitcoin Digital Gold and Store Of Value: What People Call Them

Looking back, it’s difficult to believe that Bitcoin (BTC) was once worth just a dollar. Nonetheless, this was the case in February 2011. In reaction to the collapsing banking structure that is continually prone to inflation, Satoshi Nakamoto launched blockchain technology and Bitcoin as the first cryptocurrency. This is somewhat consistent with Western economies, but when we consider the hyperinflation in countries such as Venezuela, we can begin to strongly doubt fiat money. Not only has Bitcoin’s worth and prominence skyrocketed in the last year, but it is now widely being used as a store of value. Why is this so? Let’s dive in and discover it today!

Is Bitcoin Really That Gold-like?

Could Bitcoin be the new currency that unseats gold as the world’s most popular store of value? Watch to find out:

In Simple Terms, What Is Bitcoin?

Bitcoin, often known as a cryptocurrency, virtual currency, or digital currency, is a totally virtual financial asset.

It’s similar to an online version of currency. You can use it to purchase goods and services, although not all stores embrace it yet, and several countries have outright forbidden it.

However, several businesses are starting to recognize its rising clout. For example, in October of last year, PayPal, the online payment site, revealed that its users will be able to purchase and sell Bitcoin.

The actual Bitcoins seen in photographs are a novelty. They’d be useless if the private codes weren’t written inside.

How Does It Stack up Against Fiat Money?

In the current era, minted currencies are often in the form of paper currency, which lacks the inherent worth of coins made of metals. Individuals, on the other hand, are most inclined to use electronic currencies and payment systems. Some currencies are “representative,” which means that each coin or note may be explicitly traded for a certain quantity of a product.

However, when nations abandoned the gold standard in order to alleviate fears of a run on federal gold reserves, many world currencies are still known as fiat. Fiat money is distributed by a sovereign and is not supported by any asset, but rather by the belief that people and governments have that the currency will be accepted by third parties.

The majority of the world’s big currencies are now fiat. Many policymakers and economies have discovered that monetary money is the most stable and least prone to deteriorate or lose value over time.

We’re hearing more and more that Bitcoin is a speculative bubble of little real worth. These comments are often the product of confusion and a lack of a physical currency, such as the US dollar or the Euro. To comprehend its worth, we must first consider the original reason for Bitcoin’s development.

If you were an ordinary resident of the United States in the 1950s and had $1 million in deposits, it would be worth just $100,000 today. The worth of currency has fallen in only a few decades, and in recent years, up to one-third of all dollars in existence have been released. What are the ramifications? Fiat currency is becoming increasingly worthless, and buying control is shifting dramatically. In exchange, Bitcoin was developed to offset this inflation with the aim of providing a stable currency free of outside influence, so Bitcoin functions as a peer-to-peer network. These government departments are the ones that print money and thereby encourage hyperinflation.

BTC vs Fiat Money: Network and Scarcity

The global fiat money supply is often divided into four buckets: M0, M1, M2, and M3. M0 denotes money in circulation. M1 is the amount of M0 and demand deposits such as checking accounts. M2 is M1 plus savings plans and short-term investments (known as certificates of deposit in the United States). M3 is the amount of M2 and big-time deposits as well as money market funds.

M0 and M1 would be called mediums of trade since they are easily accessible for use in trading, while M2 and M3 would be considered currency used as a store of value. Many policymakers have some flexible influence over the availability of money in circulation as part of their fiscal strategy, allowing changes based on economic conditions. Bitcoin, on the other hand, is not in this category.

So far, the continued existence of more tokens to be produced has facilitated a thriving mining culture, but this is likely to shift dramatically as the 21 million coin cap approaches. It is impossible to predict what would happen at the time; an example will be if the United States government suddenly stopped producing new legislation. Fortunately, the last Bitcoin would not be mined until about the year 2140.

In general, scarcity will raise the value of an item. This is seen in precious metals such as gold.

BTC vs Fiat Money: Divisibility

The currency that is effective is divisible into smaller incremental units. A single currency structure must have the versatility synonymous with divisibility in order to act as a means of trade for all forms of commodities and values within an economy. The currency must be divisible enough to correctly represent the worth of a product or service available in the economy.

Notably, 21 million Bitcoins are much less in existence than the majority of the world’s fiat currencies. Bitcoin, fortunately, is divisible up to 8 decimal places.

The smallest unit, equivalent to 0.00000001 Bitcoin, is known as a “Satoshi,” after the cryptocurrency’s pseudonymous creator. This enables quadrillions of individual Satoshis to be spread through a global economy.

One bitcoin is far more divisible than the US dollar and most other fiat currencies. Although the US dollar may be split into cents, or one-hundredth of a dollar, one “Satoshi” is just one-hundredth of a billionth of a billionth of a billionth of a billionth of a billionth of a billionth of a billionth of a billionth of a billionth of a billion This strong divisibility enables bitcoin’s scarcity; if bitcoin’s price rises over time, consumers with tiny fractions of a single bitcoin may still participate in daily transactions. A price of, say, $1,000,000 for 1 BTC will prohibit the currency from being included in certain purchases if there was no divisibility.

BTC vs Fiat Money: Profitability

In order to be efficient, a currency must have usefulness. Individuals must be willing to exchange currency units for products and services on a consistent basis. This is one of the key reasons why currencies were created in the first place: so that market players might stop needing to barter explicitly for products. Utility often necessitates the ease at which currencies may be transferred from one place to another. This stipulation is difficult to fulfill with heavy precious metals and commodities.

The usage of blockchain technologies has become one of Bitcoin’s most compelling selling points. Blockchain is a decentralized and trustless distributed ledger scheme, which means that no actors involved in the Bitcoin industry would maintain trust in one another for the system to function properly. This is made possible by an intricate scheme of checks and verifications that is essential to the ledger’s upkeep and the mining of new Bitcoins. Best of all, since blockchain technology is so adaptable, it has applications outside of the cryptocurrency room as well.

BTC vs Fiat Money: Ease of Transfer

To be useful, currencies must be readily transferable between members in an economy. In terms of fiat currencies, this ensures that units of currency must be transferable both within a country’s economy and between nations by trade.

Bitcoin is now transferable between parties in minutes, regardless of transaction size, and at a very low cost, thanks to cryptocurrency exchanges, wallets, and other resources. In the new scheme, moving money will take days at a time and incur fees. Transferability is a critical feature of every money. Although it takes a lot of energy to mine Bitcoin, keep the blockchain up to date, and process digital transactions, most people don’t have any actual Bitcoin in their possession.

BTC vs Fiat Money: Frangibility

A currency must be relatively robust in order to be reliable. Coins or notes made of easily mutilated, broken, or ruined items, or that decay with time to the extent of becoming unusable, are insufficient.

For fiat currencies in their physical shape, durability is a big problem. Even if a dollar bill is solid, it may be ripped, burnt, or otherwise made unusable. Digital means of payment are not as vulnerable to these physical harms.

As a result, bitcoin is very valuable. It cannot be lost in the same manner a dollar bill might. That is not to assume that bitcoin cannot be destroyed. If a consumer loses his or her cryptographic key, the bitcoins in the resulting wallet can become permanently unusable.

However, Bitcoin would not be lost and will continue to remain throughout blockchain history.

BTC vs Fiat Money: Spuriousness

In order to stay competitive, a currency must be both resilient and difficult to counterfeit. If not, malicious parties might effectively undermine the currency mechanism by flooding it with counterfeit notes, lowering the currency’s value.

Bitcoin is very challenging to forge due to the complicated, decentralized blockchain database framework. To do so would entail misleading all Bitcoin network users, which would be no easy task. The only way to make a fake bitcoin is to do a double-spend. This is where a consumer “spends” or shares the same bitcoin in two or more different environments, resulting in a duplicate log. Although it is difficult to invest the same dollar bill in two or more different purchases with a fiat currency coin, it is technically feasible with digital currencies.

Bitcoin: Payment and Value

We now understand the crypto community to be a very complex place with an unprecedented amount of protocols and crypto coins, each serving a different function. This demand has grown rapidly over the last decade. Satoshi’s intention with Bitcoin was to provide a new payment system. He hoped to transform this digital commodity into a secure alternate currency that everyone will use to pay for things. The network, i.e. the consumers, then determines the worth of this coin.

We were thrilled to see Satoshi’s aspirations becoming more and more a possibility last year. Institutional institutions are investing in Bitcoin, and conventional financial networks are incorporating Bitcoin through their potential plans. Furthermore, Bitcoin can now be used to pay for a variety of items around the globe. A significant side note is that transaction rates are still sluggish, making Bitcoin unsuitable as a modern payment system.

We can see that several institutional institutions are investing in Bitcoin, giving the first crypto coin even more carrying power. As a result, price forecasts for the coming years are optimistic. However, only time can tell if the price rises as quickly as expected. And if Bitcoin were worth $100,000, opponents would also seek its inherent value.

Unlike gold and silver, or stocks, Bitcoin as a digital currency never had a set valuation in its early years. Bitcoin’s present valuation is dependent on optimism and volatility in the current financial system.

Folklore: Bitcoin Is a Bubble

When the year 2021 starts, the growing price of Bitcoin has prompted the regular criticism that has plagued the digital currency project for a decade — that it is nothing more than a “bubble” propelled by financial speculation and euphoria.

However, for many who have spent years researching the phenomena, the charts are the newest evidence of a different fact, that Bitcoin, a true monetary innovation, is outpacing government capital in free market competition.

In comparison to how Bitcoin can be discussed elsewhere, the assertion of this article is that a body of data has arisen indicating that the program has built a true — if misguided — economy, and that this economy is increasingly integrating itself inside the global monetary order.

Indeed, it is possible that one of the more common criticisms leveled at Bitcoin — that its valuation is volatile and speculative — would be proved false by evidence that best explains it as both cyclical and predictable — in the coming year.

When stakeholders are simply involved in making a return, a project becomes a bubble. A pump-and-dump transaction is an indication of how this market can be affected. Assume you do not believe in Bitcoin, but you see that the price is rising and decide to purchase with the goal of selling it again within a certain time frame. As this occurs on a massive scale, a cryptocurrency becomes a value-losing bubble. We can see that Bitcoin is gaining popularity and that an increasing number of customers are determined to keep their Bitcoin. No longer with the intention of selling at exorbitant rates in the future, they see it as a store of value, the latest money.

True or False: BTC = Gold

In the world today, it’s very easy to say things in a matter of a click. What is hard, though, is backing what you say with peer-reviewed data that will make your claim valid. We can say that none of the two is perfect, each has its pros, and of course, its cons. Let’s tackle them.

The first is its pros:

Bitcoin

  • Quickly Sold — Since bitcoin is all digital, it is simple to pass to another customer and sell for its USD worth. You can visit another customer in person and pass your bitcoin using a QR code, or you can use a third-party trading site that will link you with a buyer digitally.
  • A currency — You will use bitcoin as digital money at every shop that accepts bitcoin if you have a mobile wallet software that helps you to pay with bitcoin. Bitcoin cannot be used anywhere as a means of payment, although it is accepted by certain major merchants.
  • emerging — Bitcoin is quite new — it has only been around for ten years. As a result, it is regarded as an emerging investment with the ability to skyrocket in value. Investing in bitcoin now may result in large returns later on. Many investors have already retired and cashed out their bitcoin deposits.

Gold

  • Dependable — Gold has proved to be a reliable long-term investment. Its worth has risen over time, and the price of gold also increases while the economy is in a slump. Since it has been used as a form or backing of currency for several years, it is often a secure investment in that regard.
  • Life Expectancy — Gold has long been used as a type of money all around the world and throughout history. Because of its beauty, usefulness, and rarity, it has been a perfect baseline for exchanging and attributing meaning. It has endured the test of time and shown its intrinsic merit since it has been used for almost as long as empires have existed. When you invest in gold, you should be certain that it will not lose worth overnight.
  • Risk-free — If you keep your gold in a precious metals IRA, it will be kept in a safe vault overseen by a custodian who will handle your account. These accounts, like conventional bank accounts, are often guaranteed up to a certain limit, so you can relax happily ensuring your investment is safe.

The cons are stated below:

Bitcoin

  • Intangible — Since bitcoin is a new investment, it is therefore highly unpredictable, prone to massive price swings in a limited period of time. Every risky investment has the potential for a large return, but it also has the potential for a large collapse.
  • Scams are prevalent — Although bitcoin is entirely digital, it also requires a place to be stored — whether on an online site, mobile wallet, or physical hard drive. Each storage solution has advantages and disadvantages. Web-based wallets can be hacked, and bitcoin can be stolen as a result. Physical wallets, such as a thumb drive or an external hard drive, may be hacked.
  • Might invent new cryptocurrencies — The existence of other cryptocurrencies influences the price of bitcoin. Since the value of bitcoin is determined by supply and demand, if the demand for another cryptocurrency exceeds the demand for bitcoin, the value of bitcoin will fall. Though Bitcoin continues to rule supreme, the possibility exists.

Gold

  • It cannot be used as money — Gold will be seen as an asset in the case of a global recession in which conventional fiat currency is no longer sustainable. Gold, on the other hand, is not actually a suitable way of purchasing anything. Although certain gold coins are legally known as money, the value of the gold that the coin is made of is frequently greater than the face value of the coin.
  • It must be held — When you buy gold, you are purchasing a real object that must be kept in a secure location. A precious metals IRA is a common and secure investment choice. If you want to keep the gold at home, it must be kept in a safe or cellar, because even then, it is possible that it would be taken from your possession.

Stock-to-Flow Ratio

The Stock to Flow (S2F) method is a method of calculating a product’s price depending on the bid. It is determined by dividing the amount in reserve by the amount generated per year. This is also known as performance product storage so they can retain the same or even greater value over a prolonged period of time. Gold is a well-known example of this.

About 200,000 tons of gold have been extracted, according to estimates. In the S2F model, this amount is referred to as stock. Meanwhile, up to 3,000 tons of gold were mined from the field per year. This extra quantity is referred to as the flow.

This ratio denotes a number, the sum of a certain asset that enters the market per year in comparison to overall availability. The greater the Stock to Flow ratio, the less of this product is marketed in comparison to the overall production. The greater the ratio, the more secure the asset.

The price is not determined solely by scarcity. Based on the gold illustration above, we may conclude that gold is not quite exclusive. The Stock to Flow ratio demonstrates the value of gold since annual demand is comparatively scarce in comparison to overall output which occurs on a consistent basis.

Bitcoin acceptance is increasing and reaching more mass investors by the day. And the price of bitcoin has risen dramatically in recent months. The stock-to-flow ratio, on the other hand, has been the predictor that has better forecast this run.

To comprehend the stock-to-flow ratio, one must first grasp the fundamentals of Bitcoin mining and the Halving. The stock-to-flow ratio compares the amount of bitcoin in circulation to the amount of bitcoin generated (facilitating through mining). Since the halving reduces Bitcoin demand, the stock-to-flow ratio rises. The bitcoin price nearly exactly matches the ratio.

Historically, the market has outperformed the stock-to-flow level before settling and leveling out. As a result, it seems that a bitcoin peak of about $150,000 over the next few years is feasible.

Final Thoughts

Although Bitcoin can give higher returns, its uncertainty makes it more difficult to find good entry points on a consistent basis. As a result, it is a good commodity to sell rather than invest in. Even then, one can exchange Bitcoin with a comprehensive range of risk management software.

Would Bitcoin eat through gold’s share of global deposits and continue to rise? Time can say, but we should certainly expect more uncertainty for Bitcoin in the coming months when new players join the sector.

If you want to make a fast buck, Bitcoin could be the way to go. However, if you want to diversify your holdings and trade on a conventional safe-haven currency, gold is an excellent option.

The ongoing global uncertainty caused by COVID-19, central banks’ “lower-for-longer” interest rate strategies, and the instability of the highly-priced stock sector makes a compelling argument for buying investments whose valuation is not linked to the economic vagaries of government policies.

By the way, now you’re here:If you are looking for crypto trading signals with high value, click here to visit our homepage right now, and learn more about what we have to offer you!

Originally published at https://eliteclubsignals.com on June 11, 2021.

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Crypto Elite Club — Blockchain research investment and trading

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Max Neuhaus

Max Neuhaus

Crypto investor and trader :: Follow me for info

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