Gold vs Bitcoin

Gold isn’t just a precious metal, it can be a very attractive one.  This can make it a very interesting investment.  For example, you can buy gold jewellery for its value and also wear it for its beauty.  This cannot be said of digital currencies such as Bitcoin.  It can, however, be said that Bitcoin is, arguably, the ultimate in portable currencies.  It is certainly far easier to transport than gold.  So which is better?  The answer to that question depends on the answer to another question – better for what?

The advantages of gold over Bitcoin

Gold is real.  There is no disputing that.  You can literally hold it in your hand.  Alternatively, and these days probably more commonly, you can wear on just about any part of your body.  Basically, you can invest for beauty as well as value.  You can also trade it fairly easily.  For practical purposes, everyone knows what gold is and the practice of hallmarking allows people to have trust that an item sold as gold is exactly that.  What’s more, if that isn’t enough, there are easily-performed tests which can verify whether or not a metal is gold and if so its level of quality.  In other words, gold scores over Bitcoin for both stability and longevity.  While it is true that the price of gold can rise and fall, history has shown that the overall trend is upwards.  History has also shown that there tends to be a distinct correlation between the price of gold and the performance of a country’s economy.  Basically, gold tends to be seen (and used) as a safe store of value and hence usually most desired (and hence most expensive) in economically-troubled times.

The advantages of Bitcoin over gold

Cynics may sniff at Bitcoin, but even they would have to admit that the criticisms levelled at Bitcoin could just as easily be levelled at any other form of fiat currency, including the Pound Sterling and the “world’s reserve currency”, the U.S. Dollar.  Originally, the value of both of these currencies was backed by gold, but in both cases, the “gold standard” was ended during the Great Depression of the 1930s.  The UK formally abandoned it in 1931 and the U.S. effectively ended it in 1933 although it only formalized this in 1971.  These days, therefore, the value of any fiat currency can be manipulated by its issuer to suit their strategic aims at any given point in time.  One obvious example of this is the rounds of quantitative easing recently undertaken by both the U.K. and the U.S.  This not only increased the supply of the respective currencies but also underlining the fact that, as centralized, currency-issuing authorities, they can increase the supply of their product any time they like.  The supply of Bitcoin, however, is finite.  This creates its own, natural “gold standard” and means that, for practical purposes, Bitcoin is more appropriately compared to gold than to fiat currency, in either physical or digital form.  Unlike gold, however, Bitcoin is purely digital in form.  This makes it much more portable and hence, much easier to use to facilitate transactions.  For example, if person A in country A wants to send money to person B in country B, person A can buy the necessary amount of Bitcoin and send them directly to person B, who can if they wish, convert the Bitcoin straight into their local currency.  This means that the long-term value of Bitcoin is irrelevant, all that matters is that it holds its value for the short length of time it takes to make the transaction.  These sorts of high-speed, digital trades, would be just about impossible with gold.