Monday , 15 July 2019


Bitcoin vs. Gold: Which Is the Better Asset To Own?

It seems that there are more and more comparisons between Bitcoin and gold, but is one better to hold more so than the other?  Each asset has their die-hard investors who view each asset as “the” asset to own, while they simultaneously look down at the other camp. Well, to be honest, each has a different ultimate purpose for which each is better suited and, as far as we are concerned, each camp has a point, which is why we feel that one should diversify into both asset classes for the same types of protections.

You see, gold and bitcoin share values which are sought after by both groups of investors:

  1. separation from the centralized financial system,
  2. scarcity,
  3. security,
  4. portability,
  5. and fungibility.

However, whereas Bitcoin may better serve investors with certain of these benefits, Gold will serve investors better with others.

1. Separation from the System

In regards to separation from the centralized finance system of the world, Bitcoin and Gold are comparable.

  • Both assets allow the holder to remain in control of their holdings, effectively becoming the bank for themselves. In that regard, holding either asset removes counterparty risk.
  • Moreover, both allow for exchange between parties without intermediaries.
  • Finally, both are immune from the inflationary efforts of central banks. 

2. Scarcity

  • All the Gold ever mined is estimated at 190,000 tonnes and there is expected to be 54,000 tonnes in the ground.
  • The current supply of Bitcoin is approaching 18 million and will never exceed 21 million. Furthermore, untold numbers of Bitcoin are lost due to misplaced keys. 
  • Therefore, it is quite clear that both assets are scarce and finite, though one could certainly argue that Bitcoin is more so. 

3. Security

The holders of both assets need to pay attention to security.

  • Security involves keeping Gold away from prying hands…[but] storage becomes an issue the larger the holding, and involves additional costs so, clearly, this is certainly one of the drawbacks of holding Gold.
  • Theft of Cryptocurrency has been one of the biggest deterrents from adoption of crypto as a common asset class yet, with appropriate cyber security protections, one can keep their Crypto secure. Given that it is not held in a physical location, there are no additional costs of storage.  Moreover, as long as one doesn’t expose how they maintain their private keys, one is unlikely to experience a physical robbery attempt…
  • The Achilles heel of Bitcoin, however, is that it requires the internet and electric grids to run properly. Should electricity become compromised for whatever the reason, I think it would be clear to understand how Gold would become the more desirable of the two assets in this event.

4. Portability

I don’t think there is much of a question that Bitcoin wins hands down with respect to portability.

  • Bitcoin is weightless and Gold is over 19 grams per cubic centimeter. This is why so many Venezuelans reportedly ran to Bitcoin to take capital out of the country. Doing so with Gold is nearly impossible during such times of crisis. 

5. Fungibility

Bitcoin and Gold are both fungible but

  • Bitcoin is much more easily divided into smaller units down to 8 decimal places. At current price, one could theoretically exchange Bitcoin worth 1 /100 of a cent. Try doing that with Gold.
  • Since units of Gold generally need to be rated for investment level purity, it is quite hard to exchange less than a 1/10th troy ounce of Gold, or roughly $140 at today’s price. 

Conclusion

Gold and Crypto…are both expected to embark on their next bull run and, a disadvantage to owning one asset is often an advantage of owning the other. Therefore, we believe both deserve a place in your portfolio for at least insurance purposes.

Editor’s Note:  The above excerpts from the original article have been edited ([ ]) and abridged (…) for the sake of clarity and brevity.  The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.  Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

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