Gold is one of the most durable substances on earth, it doesn’t degrade and will never go away. Bitcoin exists in a public ledger on thousands of hard drives and other media around the world, and the Bitcoin network can’t be shut down by any government. While in theory Bitcoin can go away, it won’t happen as long as people are still using the Bitcoin network.
According to The Wall Street Journal, the bitcoin marked the longest period in which his prices have been less volatile then the gold prices, since 2010. This is a sign indicating that investors have changed their perceptions about Bitcoin. They consider now that it is much safer and it can be one value, like gold. Bitcoin has witnessed wild price changes from the beginning. Holding bitcoin, like gold, can appeal to investors who see both as an alternative when they lose faith in traditional asset classes. Gold, has long been the only refuge for people concerned about the monetary system and the global economy. This seems to be the direction of the Bitcoin.
Bitcoin’s volatility fell below gold’s for a short period in 2012. The more recent trend has more significance as the cryptocurrency’s activity has grown. Monthly bitcoin transactions grew from 200,000 in January 2012 to more than 6 million this March, according to Wedbush Securities data. Luria (from The Wall Street Journal) said “There are a lot more forces in balance at present” .
The value of the bitcoin industry is estimated at $6.6 billion, according to Blockchain. This pales in comparison to the amount held in gold. The over-the-counter gold market trades between $180 and $250 billion daily, according to the World Gold Council. Gold has different value depending on how big the piece is. Smaller pieces is more expensive because of the production cost. There are also price differences depending on the country or mint that issued the coin. The value of one bitcoin is the same regardless if it’s divided or not. The value from one bitcoin divided into pieces has the same value as a whole coin.
Gold has been a unit of account for thousands of years, but isn’t used as that today. Gold is priced in USD and we don’t price anything in gold. Nor is bitcoin widely used as a unit of account, but its use is increasing. Multiple webshops are pricing their items in bitcoins instead of USD and other currencies. Bitcoin with its 8 decimal places is a good unit of account.
So Bitcoin is better than gold. So why hasn’t Bitcoin taken over golds status as the preferred money? There’s two reasons. First, people need to be educated about Bitcoin. That takes time. And secondly, the network effect is big when it comes to money. For something to take over, it needs to be significant better than the old alternative.
Is Bitcoin so much better than gold that it will begin to “steal” value from gold in the coming years? Probably. More and more “gold bugs” embrace Bitcoin. What do you think ? On which one do you bet?