Manoj Dalmia
Introduction
Bitcoin is a limited digital asset, as after the 21 million are mined (predicted to be in 2140), there will never be more Bitcoin released. This makes it like gold in terms of scarcity. Gold is an asset that will eventually deplete regardless of how many nuggets we capitalise. Easy mining of gold will run out by approximately 2050. Source
Store of Value vs. Fiat
There are at least two assets that are independent from the government: crypto currencies and gold. Experts believe that, while digital assets and gold may be volatile, they both have proven to retain monetary value. Prices of both assets appreciate or depreciate based on demand and supply.
In the case of fiat money, bank deposits can be depreciated due to inflation controlled by the government. Not only be depreciated, but also be withdrawn or frozen under some invented grounds.
Hedge Against inflation?
What would you say if I tell you that in 7 Years the value of Cash that you hold will become half?
Investor’s view bitcoin as digital gold and a hedge against inflation, expecting it to appreciate over time over-performing the current inflation rate. The same stands for Gold but it has not performed well in the past few years.
Below are 4 features that makes Bitcoin not just similar but a better asset than Gold
- Rarity: Bitcoin is rare. It cannot be created at will; there are only 21 million of them, and no one can create more. That means that no government can control it or fake it. No one is going to create more gold which will be possible. The scarcity of gold changes depending on how much you put into finding it.
- Durability – Both bitcoins and gold are almost perfectly durable. If the internet operates, bitcoin will be in use. As far back as it can be traced, gold has been used to make jewellery, trade, etc.
- Divisibility – Bitcoin can be divided into individual Satoshi’s, with 100,000,000 Satoshi’s making up 1 BTC. Gold cannot be divided as easily or as precisely but it can be minted in smaller denominations
- They are hard to fake – Bitcoin and gold can’t be counterfeited and duplicated. Bitcoin is easy to recognize and impossible to counterfeit. Gold is recognizable, though it must be tested for purity under some circumstances.
Conclusion
Gold can give you insurance against inflation and overvalued stock markets. Crypto analysts and experts believe that Bitcoin is the most asymmetric investment opportunity on the face of the planet right now. The upside in investing in Bitcoin is so much higher than the potential downside, that no other investment even comes close.
