During life before bitcoin and the blockchain, people sceptical of the global economy and central banking systems would often excite buying gold. These people wanted a hedge against inflation as the boom, and bust cycles of the economy usually meant pumping cash into the economy.
So, gold became the standard to park assets and not risk losing money. Now that bitcoin has been invented along with the blockchain, there is an alternative to fiat money. Bitcoin seems to share a similarity with gold in that way.
And this has led to a lot of comparisons with people asking if bitcoin is better than gold at this point. In this article, I will go over several things to keep in mind when looking to invest so you can decide if bitcoin or gold is your best option.
A decade ago, Bitcoin was invented to counter the effects of too many recessions happening and central banks having too much influence over these market crashes.
The technology behind it is a decentralised ledger or database called the blockchain. This so-called chain is made up of nodes that all contain information about transactions that then get verified. Much like gold, bitcoin is mined meaning that people that verify the nodes are rewarded with bitcoin.
Also, like gold, there is a finite amount of it. It cannot be printed at will like fiat and once it is all mined there is no more supply.
This makes it very attractive for several reasons with being disconnected from any central authority chief among them. The value has skyrocketed since its debut and people have flocked to it as a way to make money speculating. Nowadays there are a lot of people that use it to store value and reduce their risk of losing it doing turbulent economic times.
It is so mainstream that you can use it to pay for things, accept it as payment and even use an ATM to withdraw it into regular old cash. Just search Coinbase ATM near me to see how many there are these days.
It does have a reputation as being volatile, so making short term trades may not be the best way to go if you are trying to park your money. Waiting things out is likely your best bet.
Since gold is a limited resource, it has been the standard for storing value for millennia. It can’t be printed or created so it is very stable. The value is very resistant to being manipulated.
This makes it very attractive to people that are afraid of the government’s overreach in how they handle the economy. And like bitcoin, it is not tied to the markets like the Dow and S&P 500, so it doesn’t necessarily lose value if the market dips or heads to a recession.
As more people buy when there is a storm on the horizon, the value of it rises, so it makes for a good backup plan.
Which is better? It all depends on your risk tolerance as bitcoin has more volatility than gold.
*This article has been contributed on behalf of Paxful. However, the information provided herein is not and is not intended to be, investment, financial, or other advice.