Money is anything that a majority of the population believes can be used as a medium of exchange for services and goods. In history, various things have been used as a medium of exchange; they include beads, shells, grain, and much more. One of the latest commodities to be used as money is gold. In the past few centuries, gold has been widely accepted as a medium of exchange by the major economies of the world.
With some economists predicting the financial system is headed for a major crash, some have predicted that it could lead to a revival of the use of gold as the main medium of exchange. However, some believe that Bitcoin could take this role. Some have even named BTC “digital gold.” According to a recent medium post, there is still a long way to go before this can happen.
Bitcoin as a Safe Haven
In the modern world of finance, gold is considered the ultimate safe haven. Many enthusiasts believe that Bitcoin could take up this role but it still has numerous flaws. For one, Bitcoin is destructible. If you lose your private key or your cold wallet is destroyed, your BTC holdings are lost forever.
Another issue is how expensive gold is. One gold coin costs $1500 while one BTC costs over $7,000. Most investors looking for a safe haven are in search of something cheap whose value will appreciate, as things get worse. When compared to gold, BTC has already experienced high rates of volatility. Despite Bitcoin price being uncorrelated to traditional markets during turmoil, it hasn’t always followed that protocol. There’s numerous times where Bitcoin price fell during traditional market sell-offs. It’s no secret that that some geographic regions have difficult time allocating capital to Bitcoin. Until transparency exists in the regulatory norm, it’s hard to argue a true “safe haven” exists.
One of the reasons gold is considered precious is how rare it is. However, this is not the case with BTC. The coin’s blockchain still has major flaws such as slow speeds and high costs. It is worth noting that BTC is not scarce. Developers are always working to develop a better version of BTC, which could one day lead to the creation of a cryptocurrency that is more valuable than BTC. This is not the case for gold, it is scarce and cannot be replicated, which assures investors that their investment will not be potentially wiped away overnight when an improved version of gold is launched.
Its price volatility also means that many companies are not willing to accept BTC payments since they cannot predict how much the price will change in the next few minutes. However, gold’s stability is ensured by the fact that its supply only grows 2% annually. There are also numerous use cases for gold such as in sophisticated electronic components and jewelry. It is also used in the medical field to treat various medical conditions.
Making the Case for BTC
What most people forget is that BTC is valued in fiat currencies. If fiat currencies were to collapse, there would be nothing backing the value of BTC. Thus, you would not have anything into which to convert BTC. There is also the fact that gold-backed cryptocurrencies are being introduced into the crypto market. If BTC ever hopes to be a viable safe haven, there is still a lot that needs to be done.
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