Knowledge

Bitcoin vs Gold: Why Bitcoin Will Never Replace Gold?

Cryptocurrency, a term unheard of until 2009, has now taken the investment market by storm. The crypto market is expanding with every passing minute. From $3,800 in March 2020 to $62,730 in April 2021, we have seen the mighty rise of Bitcoin. Bitcoin’s marvellous growth has put it as a competitor in Bitcoin vs GOLD battle, questioning whether Bitcoin will replace GOLD in the near future.

Let’s find out!

A lot of researchers have compared Bitcoin with GOLD. A few experts even think of Bitcoin becoming a predominant resource in the long run. However, Goldman Sachs analysts believe these two assets will not cannibalize each other.

Four Goldman Sachs experts, in a note, shared that GOLD will not displace Bitcoin in any investor’s portfolio, and Bitcoin won’t displace GOLD either.

In a Coindesk report, four Goldman Sachs write –

In an environment of broadband dollar weakness and still very low and negative real rates, we do not see either asset cannibalizing each other and see enough room for both.

According to the analysts, the two assets are occupying the opposite ends of anyone’s investment spectrum. Where GOLD is the defensive play for investors, Bitcoin serves an alternate role as the risk play due to its extreme volatility.

The analysts attributed to investors why GOLD suddenly underperformed in 2020, rotating to riskier assets like Bitcoin.

In a Bloomberg report, JPMorgan’s strategists write –

If this medium to longer-term thesis proves right, the price of GOLD will suffer from a structural flow headwind over the coming years if investors transition from GOLD to Bitcoin.

Why Bitcoin Won’t Replace Gold as the Ultimate Store of Wealth?

Bitcoin and other cryptocurrencies may be loved by investors around the world for generating instant profits and its decentralized mechanism of working. However, gold has been holding a special place in the hearts of investors and it will continue to do so till the times to come. Here are some clear reasons why Bitcoin will never be able to replace gold as the ultimate store of value.

Bitcoin is Volatile: Bitcoin vs Gold

Bitcoin prices are highly volatile and keep changes every now and then. There have been times when the prices of Bitcoin have changed by over 30% in one day. This volatility in prices makes Bitcoin a not-so-favourable asset for investors looking for steady gains over time.

Bitcoin is Just Like Fiat Money

Since Bitcoin is not backed by any tangible asset, it acts just like fiat currency. It has no intrinsic value. So, if Bitcoin markets crash, investors won’t be able to exchange it for any backing asset.

Bitcoin is not Immune to Market Fluctuations: Bitcoin vs Gold

Investors love gold so much because gold is immune to market fluctuations like rising inflation rates. On the other hand, Bitcoin prices get affected whenever there are market fluctuations due to unforeseen reasons around the world.

Last Note

Despite many similarities, the two assets are fairly distinct. Both the assets complement each other for being hedges against national fiat currencies.

Where Bitcoin can be used as a highly speculative asset, GOLD has non-monetary value and provides long-term stability. After all, the yellow metal has an exceptional track record proving its value over millennial.


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