Is Bitcoin Similar to Gold?
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With so many Cryptocurrency out there in the market, the financial media find it really hard to cover all the Cryptocurrencies. So, to make sure that all the relevant information is told to the world related to the cryptocurrencies, the financial media covers only the most prominent of the Cryptocurrencies.
Out of the most prominent Cryptocurrencies, one stands out the most, that is, Bitcoin. The popularity of the bitcoin has increased so much that all the traders and the investors have started calling out the Cryptocurrencies as the “Digital Gold”. And why not, there are some good reasons to do so.
Here are the reasons why traders call Cryptocurrencies as Digital Gold.
If you will compare the relation of the bitcoins and the gold, both have monetization characteristics.
According to Wall Street, both can be considered as the alternative investments.
Both of then come to the market by the Mining process.
Both have a limited amount in the market. So, the price evaluation is done by the stock present in the market.
And it is an undeniable fact that Bitcoin is the most precious currency among the Cryptocurrencies. In the same way gold is the most precious metal among all the metals present in the world.
Is Cryptocurrency Similar to Gold?
There are many characteristics that prove that to some extent Cryptocurrencies can be compared with the gold in terms of Assets.
Let’s have a look at the comparison.
1. More durable source of value
The very fact that gold has been used as an asset for the currency since the medieval time, attest to the durability of its value. Where on the other hand, Bitcoin is just a new face in the market that has surfaced recently.
Comparing these two in terms of their durability value might be going overboard. Bitcoin has yet to enter under the wings of the Central government, whereas Gold has already been a part of their monetary system since medieval civilization.
2. They both have demands
If we compare the two assets in terms of demands, then you will see that these two share a number of demands in the market. These demands have made many companies launch their own Bitcoin trading software. Software like bitcoin loophole provides every service related to Bitcoin trades.
The demands of the Bitcoins fall under the following categories:
And finally, the blockchain network itself.
And for the Gold, we all know that Gold is used in the jewellery, used as fixed funds, and assets in the trade market.
3. Bitcoin is easier to substitute
We all know how volatile the Bitcoin is. This make then highly prone to easier substitute. This feature creates doubt for the long-term investment in the Bitcoins. Bitcoin is not the only Cryptocurrency in the market. There are other Cryptocurrencies as well like Ethereum, and ripple that are considered closest to that of Bitcoin. So, if Bitcoin misses out with its performance, it can easily lose its top spot to Ethereum and Ripple.
4. Bitcoin has high volatility than Gold
Volatility: It is the second nature of Bitcoin. But if the bitcoin really wants to be known as the Digital Gold, this is the only nature that it does not need. Because to stay in power, bitcoin needs to be stable. In 2017, when the evaluation price of bitcoin rose to its peak value of $20,000, everyone started comparing Bitcoin with Gold. But it was the same year when the evaluation price dropped to $15,000. So if we consider only the volatility of Gold and Bitcoin, then Bitcoin is surely at a loss.
With all the comparison made above, one thing is for sure that Bitcoin is far from being digital gold. It is possible in the near future. But for now, it looks close to impossible. The reason can be Cryptocurrency’s decentralized features.