Thanks to the recent price recovery of Bitcoin, mass media is once again bringing the popular cryptocurrency under the spotlight. According to popular goldbug and best selling author Robert Kiyosaki, Bitcoin is expected to see massive price increases and is a great investment for a diversified portfolio.
There are countless comparisons between Bitcoin and gold, often based on selective research. These can often confuse new investors who are trying to build a diversified portfolio in response to the events that led to our unstable economy.
In this article we will do our best to not “sugarcoat” the truth - instead, we list factual truths that illustrate how an investment in Bitcoin is more efficient than buying gold. We also explain why it has a high potential to outperform gold-related profits in the long term. Let’s get started.
Bitcoin is intangible
One of the main benefits of Bitcoin over gold is the way it’s obtained and transferred. Being a digital asset, people can buy bitcoin with debit card instantly from the comfort of their phone, and store it safely. They are also able to transfer it with little to no fees to anyone in the world, without being taxed along the way.
The same cannot be said about gold. The precious metal is both bulky and heavy, making it difficult to exchange. Additionally, overseas transactions are heavily taxed, and there is no way around it.
One could argue that “paper” gold acts in a similar manner than Bitcoin. By this we refer to virtual gold that people can purchase on popular investment apps, like Revolut. While this is partially true, users that purchase a virtual position in gold will never own the precious metal. Instead, they ownage rights belong to the third party that was used for the purchase, making the investment less secure.
No storage and insurance fees
Gold is most often purchased through gold dealers and brokers. It is then stored in secure facilities that charge an annual fee to ensure its safety. These fees (related to storage & insurance) can quickly affect the potential profits of your investment.
Bitcoin, on the other hand, does not require a physical facility in order to be stored safely. It also does not need a third party insurance policy.
• Users store their funds in a Bitcoin wallet and write down a backup phrase that gives them full control over their coins. Bitcoin wallets come in different types, each with their own unique benefits. Most wallet options are completely free of charge and don’t charge monthly fees. Some wallets come at a cost ($70-$200), but the price is well worth it when considering the additional security layers they offer.
• Most FDIC regulated exchanges offer insurance for accounts that hold up to $250.000. Having said that, you don’t need to store your Bitcoin on an exchange. If your funds are stored in a cold wallet it is literally impossible for anyone to access and use your funds.
The real supply of gold is unknown
Gold maximalists tend to mention that gold has a fixed supply and that there is at least a general idea of how much gold exists in the world. This is directly related to gold’s value. But there are many variables that weaken this assumption:
• Technological progress has made it possible to create lab-developed gold that is nearly identical to the precious metal. Obviously, this gives a negative reputation to the market and makes it harder for new investors to understand which option to invest in.
• Many influential investors are lately talking about the potential mining gold off asteroids. This sci fi-inspired assumption something is actually very realistic and could become a reality in the next decade thanks to the progress in space travel. If this would happen, the supply of gold would increase massively, decreasing its value as a result.
Having said that it is important to mention that Bitcoin has a total supply of 21 million coins, of which approximately 5-6 million are lost (no keys; no access). Based on this point, one could argue that Bitcoin is the most scarce investment option, and thus a lot better to invest in compared to gold.
Bitcoin is more popular with millennials
Gold is more popular with investors that belong in the generation of baby boomers and Gen Y’s. It was one of the very few investment options that was not reserved to accredited investors and buyers with significant amounts of money. And even for them, the process to obtain the precious metal was very complex.
The same is not true for Bitcoin. The popular cryptocurrency has amassed a large fan base that promote it in every possible occasion and build UX/UI that suits the younger generations. Creative coin symbols, passive income opportunities, and many different investment products make cryptocurrency easier to adopt than gold. Millennials love it, and are ready to invest a large sum of money in hopes of rewards that were previously unheard of.
While gold is still a powerful investment option that belongs in every long-term portfolio, it is evident that cryptocurrency is slowly building momentum. Several influential personalities are already making bold predictions, claiming that Bitcoin will outgrow gold’s market cap before the end of this decade.
Bitcoin is more efficient and potentially more rewarding than gold. Even though there is a high degree of volatility that a new investor should be prepared for, there are many reasons to believe that gold is solely becoming outdated. Here are a few of the reasons we talked about:
• Bitcoin has an intangible nature, making it easier to store and transfer
• There are little to no fees associated with Bitcoin’s storage and insurance
• The real supply of gold is unknown; Bitcoin is capped at 21 million coins
• Bitcoin and cryptocurrencies are built for younger generations
Despite all the benefits mentioned above, we still believe that a balanced portfolio should include both gold and Bitcoin. The degree to which you choose to invest will highly depend on your personal preference.