Bitcoin Vs. Gold: Store Of Value
By Lamium on Altcoin Academy
As global uncertainty increases, bitcoin and gold have both increased their popularity as a store of value (SoV) assets. Gold has a multi-century track record as money and asset class, meanwhile, bitcoin is a bit over 10 years old. Which one has the edge? We’ll find out.
Correlation
Comparing the two asset classes, bitcoin has been more correlated with gold during the second quarter of 2019. The growing correlation indicates that smart investors have reallocated their assets into “safe haven” alternatives, like gold and bitcoin. If or when the global uncertainty continues to grow, we’re very likely to see the price and correlation of above-mentioned assets to grow.
Store of Value
Store of value refers to an asset that can be set aside for future use. As it can be used in the future, it is believed to hold value over time, as opposed to perishable goods, which are a poor store of value.
Skeptics of bitcoin argue that the cryptocurrency has no value and is merely worth what the next person is prepared to pay for it. Some also believe that the fact that you cannot physically touch it is consequential when ascertaining its store of value.
It can be argued that while bitcoin has been used as a medium of exchange, neither bitcoin nor gold meets all three functions necessary to be considered “money” and therefore neither fully satisfies a utility as a currency.
However, both bitcoin and gold are showcasing excellent features for SoV asset, and will very likely be used in this role without any competition in sight.
Sources of Demand
Bitcoin is mainly used as a safe haven asset, it offers investors protection against escalating global uncertainty. The demand for bitcoin is partly speculative too, as with any asset.
Source of demand for gold comes from three segments. Jewelry (54%), investments (30%), technology (10%), and central banks (6%). The main use case for gold are jewelry products, however, gold’s scarcity features make it a fairly good hedge instrument.
Conclusion
While gold has some exceptional properties, bitcoin has an edge in the store of value when comparing the two. Bitcoin is an antifragile censorship-resistant asset, ideal for cross-border transactions. Bitcoin is the optimal solution for any investor looking for a long-term store of value.
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