Bitcoin is the new gold?

The total market capitalization of gold today is about $13 trillion. The cryptocurrency market is valued at about $1 trillion. Bitcoin still lags far behind gold, but the progress is impressive. Today, lines of code can rival an asset with thousands of years of history. Some people even call bitcoin "the new gold." How correct is such a comparison? Let's find out.

SIMILARITIES AND DIFFERENCES

Whether cryptocurrency can be called the new gold is debatable. There are some similarities between the two assets, but there are also some key differences.

Similarities

• Both gold and cryptocurrency are scarce assets. There is a limited amount of gold and a limited amount of cryptocurrencies in the world (in the case of bitcoin, there can be a maximum of 21 million coins).

• Both are seen as a defense against inflation. When the value of paper currencies (such as the dollar) declines due to inflation, the value of gold and cryptocurrency increases.

• Both gold and cryptocurrency are decentralized.

Differences

• Gold is a physical asset, while cryptocurrency is a digital asset. Gold can be stored in physical form, whereas cryptocurrency exists only in the form of computer code.

• Gold has a long history of use as a savings vehicle, whereas cryptocurrency is a relatively new asset.

• Cryptocurrency is widely accepted for payment, while gold cannot be used in this way.

Bottom line: gold and cryptocurrencies are both scarce and decentralized assets that can act as a hedge against inflation. However, gold is a tangible, time-tested means of saving, while cryptocurrencies are newer digital assets but can be used for payments.

HISTORICAL PRICE DYNAMICS

The value of gold has been relatively stable over the long term. The price of gold has doubled only a few times in the last 100 years. Gold is seen as a hedge against inflation: while traditional currencies have become cheaper, gold has retained its value.

The price of bitcoin has been much more volatile than the price of gold. Bitcoin has risen and fallen sharply several times in the last 11 years.

Note that high returns in the past do not guarantee high returns in the future.

WHICH IS BETTER SUITED TO PROTECT AGAINST INFLATION?

Gold has long been used as a hedge against inflation, so it is considered the best choice for this purpose. Bitcoin has the potential to replace the precious metal, but so far trust in it is not high enough.

WHICH IS MORE STABLE?

Gold is more stable than cryptocurrencies. The price of bitcoin has fluctuated wildly in recent years, making it a risky investment for some people.

WHAT IS THE BEST THING TO INVEST IN?

Gold is considered a safe asset, while bitcoin is more risky, but has the potential for greater returns. Ultimately your best investment will depend on your circumstances and risk tolerance.

The right choice may be to have a diversified portfolio of different assets: not only gold and bitcoin, but also stocks, CFDs, etc.