Bitcoin or Gold…Which is better to store right now?
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Answer Bitcoin or Gold…Which is better to store right now?
The cryptocurrency community insists that Bitcoin is a digital version just like gold, that can be used as a safe haven against inflation.
Many investors, institutions, celebrities and companies are now hoarding Bitcoin to counter inflation in the markets, but how does the new digital currency compare to the oldest and most popular safe haven in the world?
It is no secret that gold has a longer track record than its digital rival, as Bitcoin came out only 13 years ago, while gold predates human civilization, and the oldest record of the use of gold dates back to 4000 BC.
Over those years, gold played a pivotal role in global politics and economy, with most world currencies pegged to the value of gold until 1971.Read:UEFA implements a blockchain-based ticket distribution system
But just because bitcoin is new doesn’t mean it’s any less secure, the underlying blockchain has never been hacked, and bitcoin has certainly helped make more fortune than gold over the past 13 years.
In terms of ease of storage
While gold has a beginning since history, we can say that Bitcoin is more suitable to invest in.
Unlike gold, bitcoin can be stored online or in an electronic wallet, and can be moved around the world within minutes and at minimal costs.
Currently the average bitcoin transaction costs around $1.50 and it only takes about 10 minutes.
In comparison, gold must be safely stored, transported, and protected around the clock; Which makes it less suitable for the digital age.
In terms of price volatility
Although Bitcoin is easier to store and deal with, it is more volatile than gold.
The standard deviation of bitcoin – a measure of how much it is able to exceed its average price in either direction – is 4.34. Compared to the standard deviation of gold, Bitcoin is slightly higher than the standard deviation of gold.
And if you are looking for a more stable asset, then gold is definitely the best option.Read:Elon Musk wants Coinbase to include Dogecoin! Will you respond?
Correlation is a key factor when measuring the risk of a particular asset.
If the price of a particular asset moves independently of the economy or other traditional investments, then storing in that asset can significantly reduce risk.
Correlation coefficients range from -1.0 (perfect negative correlation) to +1.0 (positive perfect correlation), 0 shows no correlation at all.
Bitcoin’s correlation with US stocks is at 0.66, so it’s not the best way to reduce risk for a traditional wallet.
While the relationship of gold stocks changes over time depending on different economic conditions, but in times of high volatility in the stock market, gold prices have a low or even negative relationship with stocks.
Reserve assets of the central bank
Gold is used as a reserve asset by central banks around the world, which is a major factor that makes it distinct from Bitcoin.
Countries have gold reserves as a safe haven, with countries like France, the United States, and Germany holding nearly 80% of their total monetary reserves of gold. This use as a reserve asset creates a strong ground for the value of gold.Read:Report: $17 million worth of Bitcoin stolen from users of popular exchanges like Binance
Bitcoin is starting to gain acceptance from governments around the world, El Salvador submitted a legal tender for Bitcoin last year, and many other countries such as Brazil and Mexico are considering the same.
Some governments are also considering digital assets as a way to circumvent sanctions, Russia for example is considering accepting bitcoin for its oil and gas exports.
Distribution of gold and bitcoin
Gold is distributed naturally throughout the world, Australia has the largest proven gold reserves at 20% of global capacity, meanwhile gold that has already been mined is widely distributed among jewelry buyers, companies and central banks.
Until recently, the majority of bitcoin mining was done within China, but since China cracked down on cryptocurrency mining, the largest proportion of cryptocurrency miners are widely distributed around the world, in fact, no country currently represents more of 35% of mining capacity.
The largest bitcoin is owned by anonymous network founder Satoshi Nakamoto. Nakamoto owns 1 million bitcoins, which is about 4.7% of the total supply, while public companies own nearly 1%.
The role of culture
In some parts of the world, storing wealth in gold is ingrained in the local culture, for example, it is an essential part of rituals and marriages in India, which is why Indian families hold treasures of gold worth $1.5 trillion.
Bitcoin is rapidly gaining cultural credibility as well, as according to several surveys, nearly half of North American millennials said they would put a portion of their savings into bitcoin.
Crypto’s role in internet culture and investment makes it an even greater force in the global economy. It remains to be seen if this cultural revolution has the potential to replace gold.
Gold is definitely more stable than Bitcoin, however, Bitcoin’s flaws are quickly being resolved and young investors are adopting it in greater numbers, and over time, the world’s most popular cryptocurrency may emerge as a stronger alternative than gold to hoard risk.
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