Bitcoin: 5 Reasons Why It Can Be A Better Investment Than Gold
The emergence of forty-year high inflation readings and the increasingly dire-looking global economy has prompted many financial analysts to recommend investing in gold to protect against volatility and a possible decline in the value of the United States dollar.
For years, crypto traders have referred to Bitcoin (BTC) as “digital gold,” but is it actually a better investment than gold? Let’s take a look at some of the conventional arguments investors cite when praising gold as an investment and why Bitcoin might be an even better long-term option.
Reasons Why Bitcoin Is A Better Choice
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One of the most common reasons to buy both gold and Bitcoin is that they have a history of holding their value through times of economic uncertainty.
This fact has been well documented, and there’s no denying that gold has offered some of the best wealth protection historically, but it doesn’t always maintain value. The chart below shows that gold traders have also been subject to long bouts of price declines.
Gold has historically been seen as a good hedge against inflation because its price tended to rise alongside increases in the cost of living.
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But, a closer look at the chart for gold compared with Bitcoin shows that while gold has seen a modest gain of 21.84% over the past two years, the price of Bitcoin has increased 311%.
In a world where the overall cost of living is rising faster than most people can handle, holding an asset that can outpace the rising inflation actually helps increase wealth rather than maintain it.
Often called the “crisis commodity,” gold is well-known to hold its value during times of geopolitical uncertainty as people have been known to invest in gold when world tensions rise.
Unfortunately for people located in conflict zones or other areas subject to instability, carrying valuable objects is a risky proposition, with people being subject to asset seizures and theft.
The U.S. dollar has been strong in recent months, but that is not always the case. During periods where the dollar’s value falls against other currencies, investors have been known to flock to gold and Bitcoin.
If various countries continue to move away from being U.S. dollar centric in favor of a more multipolar approach, there could be a significant amount of flight out of the dollar but those funds won’t go into weaker currencies.
Many investors and financial experts point to scarcity and supply constraints for gold following years of declining production as a reason gold is a good investment.
It can take five to ten years for a new mine to reach production, meaning rapid increases in supply are unlikely and central banks significantly slowed their rate of selling gold in 2008.
That being said, it is estimated that there is still more than 50,000 metric tons of gold in the ground, which miners would happily focus on extracting in the event of a significant price increase.