The boom of Cryptocurrency led by Bitcoins has made investors think of the use of Bitcoins as a store of wealth. Gold, being the ultimate store of wealth for centuries, is being replaced by Bitcoins by the investors who have enough experience and appetite to take high risks.
As a long term investment option, no doubt Bitcoins is on top, and it might give you many high profits but using it as a store of wealth depends on whether you are ready to take a high risk by investing in Bitcoins or want to use gold as a safe haven as the ultimate store of wealth.
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Bitcoins or Gold – which is a better store of wealth?
1. Bitcoin is much more volatile than gold
The value of Cryptocurrencies, including Bitcoins, tends to fluctuate a lot. It is quite impossible to predict whether the value will go up or down when it comes to Bitcoins. Any new concerns regarding Bitcoins or a single tweet from a famous influencer can make a huge change in the Crypto market and can lead to an increase or decrease in its value.
On the contrary, the value of gold is way more stable than Bitcoins. Returns in investing in gold come slowly, but it gives you assuredly inclined returns, and it is safe to use gold as a store of wealth. The value of Bitcoins declines faster than gold. Investing in Bitcoins is quite risky, but with high risk comes larger gains.
If you have the appetite to take high risks, then you can think of Bitcoins as a source of wealth, or else you can always consider gold as a safe haven with lesser risk, slow but constant returns.
2. Bitcoins have no intrinsic value
Cryptocurrencies including Bitcoins have no intrinsic value, i.e., it has no worth of its own other than serving as a means of exchange. If you still want to invest in it as a source of wealth, knowing that it has no intrinsic value and being highly volatile, there is no guarantee whether it will give you surprisingly high profits or you might incur a loss.
In comparison to Bitcoins, gold has non-monetary use as well. It has been a precious metal for centuries and has survived several global market crashes, yet the value of gold grows constantly. Even if the value of gold becomes zero, it will have several uses. Moreover, the purpose of gold is to serve as a store of wealth for a long time which is why the value of gold is relatively constant.
But the purpose of Bitcoins is to be used as a source of exchange, not a store of wealth, but people still don’t spend it and wait for its value to go up so they can trade at a higher price. If sooner people don’t use it as a source of exchange, then its price will fall eventually.
3. Even Bitcoins are not immune to inflation
An ideal asset as a store of wealth would necessarily be immune to inflation. Talking about Bitcoins, like any other currency, even bitcoins are not immune to inflation. With the increase in supply, the value of bitcoins will dilute as it is created by mining. Mining Bitcoins solo would have been quite expensive and difficult, but with the help of mining pools purchasing power might fall as the supply for Bitcoins increases.
On the other hand, gold has been untouched by the effect of inflation. The price of this precious metal constantly rises even in case of inflation. Moreover, gold being a precious metal, searching for gold is not that easy; hence the supply will be less and limited as compared to its demand. The slow yet constant increase in the price of gold makes it suitable for a store of wealth.
The total number of Bitcoins that can be mined is limited, but that would take years to reach there, and maybe in the future, with the decrease in supply, the value of bitcoin will go up if demand for Bitcoins keeps increasing at the current rate.
Cryptocurrencies, since their inception, have been a major concern for the environment, and with their progress and growth, there have been several other concerns related to it. Mining Bitcoins requires expensive computing devices and a huge amount of energy and other restrictions from government and financial institutions of several countries, continuously leading to falling in price of bitcoins.
A major advantage of gold over Bitcoins is having no concerns as such related to gold and its production. With no concerns, there is likely less chance the value of gold will ever go down at a constant rate.
No matter there are several concerns regarding Bitcoins, but developers of bitcoins are still working to take care of all the concerns. Even with several concerns and barriers, Bitcoins are still the world’s most valuable currency, and daily countless new investors are still investing in Bitcoins.
It’s true that several investors have shifted to Bitcoins and making huge profits from investing in Bitcoins but investing in gold has its perks too. It won’t give you a huge amount of return like bitcoins, but since the value of gold has constantly been increasing for decades and using gold as a store of wealth would give your guaranteed profits in the future.
Looking at the current scenario and increasing popularity, Bitcoins might replace gold as a store of wealth. Moreover, the concept of Bitcoins is still in the development process, and if you want to replace gold with Bitcoins as a store of wealth, you would still make enough profits that you would get from investing in gold years after years. With Bitcoins, it’s difficult to predict what the future holds.