Gold is one of the valuable assets that has cashed in on the economic instability by hitting record prices and notching up high trading volumes. Hence, a Cryptocurrency development company needs to take note of the trends and issue gold-backed digital tokens. Factors such as a weakening US dollar due to increased government spending and a recession-like situation in most markets has contributed to the rise in the demand for gold. It has kept up its name of giving investors protection against inflation, interest rate cuts, and depreciation in the currency.
An easy-going monetary policy has also led to gold’s popularity. Hedge funds are also bullish on the metal leading to high demand in the futures market. Bitcoin, as well as Gold, are used especially in terms of financial turbulence to protect investors from a crash in the stock market.
As the competition between the yellow metal and leading digital currencies such as Bitcoin intensifies, both have experienced a huge price rise off late. While Bitcoin has crossed $12000 recently due to regulatory stability and demand from asset managers, gold has crossed the $1900 mark consistently. This indicates that Bitcoin is stabilizing at close to six times the price of an ounce of gold. Both Bitcoin and gold have similarities as they depend upon fixed supply and a moderate growth rate.
Bitcoin, which is considered the most popular cryptocurrency, would also have to watch out for the halving that takes place once in four years. Their performance also relies on the stock-to-flow ratio.
Gold ticks the right boxes as it appeals to the mainstream investors due to its ease of transport and confiscation. While Bitcoin can be restricted or even banned in some countries, there is no chance of Gold being outlawed. It is also easy to prove the ownership of Gold when compared to Bitcoin.
Bitcoin offers more freedom for traders as it is decentralized through blockchain technology. Golds are regulated as they are stored in government vaults.
How Bitcoin is different from Gold
- Unlike gold, which depends on anti-corrosive properties, Bitcoin relies on the future value of online transactions conducted through its networks.
- It has been in existence only for more than a decade and is highly speculative.
- Bitcoin operates without fiat stamping as it bypasses financial authorities.
- Gold has more institutional acceptance than Bitcoin.
- Investors who lose their money by investing in gold may be compensated by the government. This can never happen in the case of Bitcoin.
- Bitcoin can be used in cross-border transactions and e-commerce platforms, unlike gold, which lacks flexibility as it acts as a static store of value.
- Though both Bitcoin and Gold are mined, the former uses a different financing model based on communication between an open-source community.
Advantages of Bitcoin over Gold
While there are chances of Gold being overproduced, which will lead to inflationary pressures, there is no chance of such situations occurring with Bitcoin. As businesses go digital, Bitcoins would become more favorable.
Bitcoin also depends less on the physical supply chain making it more adaptable to downturns in the market. With paper currency slowly losing its value, gold cannot be used to buy goods or services.
Bitcoin outsmarts gold as it can be easily transferred across borders in a hassle-free manner. Greater acceptance of Bitcoin as a form of payment by large multinational companies has contributed to its growth.
Though cryptocurrencies are volatile in nature, they have huge potential to generate enormous returns in the future.
Growth in prices of Bitcoin is faster than that of gold. Since Bitcoin is built on an immutable distributed ledger, all participants have equal access to data for verifying transactions independently. Though gold is a stable asset, it lacks accountability as it can be counterfeited easily. Bitcoin cannot be built as a fake platform as the network will detect the anomaly.
Bitcoin offers more privacy for a cryptocurrency development company than gold through digital execution of contracts. Cryptocurrencies are more divisible as they can be bought and sold in fractions, unlike gold.
Low transaction fees and minimal storage costs make Bitcoins more attractive as it has no capital restrictions.
While gold is regulated heavily by government policies and banking rules, Bitcoins are free from the interference of authorities. The purchase of gold may lead to incurring taxes. Bitcoin is tax-free.
Due to the abundance of cryptocurrencies, Bitcoin can be substituted by speculators for other digital assets. Since gold is regarded as the most precious metal, it struggles to get replaced.
During a downturn in the market, Bitcoin can be quickly liquidated electronically, unlike gold.
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