For the past years, economists and analysts anticipated a recession. After many years of being concerned about the eruption of this possibility, investors began searching for safe havens to move their investments. One of the most traditional and effective methods to shift was hedging stock instability with gold. But there is a new alternative that is challenging this traditional method. Bitcoin is the latest alternative that brought about new digital currencies. It was launched in 2009, and it is one of the leading cryptocurrencies with unique features that makes it a great alternative.
Gold as a Safe Haven
Even though Bitcoin came as the newest cryptocurrency, Gold stills remains the safest and strongest haven asset. It is a scarce and valuable material for different goods such as electronics and jewelry. Even though its supply is inadequate, Gold has a high demand. One cannot manufacture Gold in the same way one prints money for a federal bank or a company’s new shares. It must be excavated and processed. Gold has no connection with assets like stock indices and currencies. It was tied to dollars until 1971 when it was connected to the base of the United States currency. Since then, those who do not want to incur market swings have invested in gold.
Bitcoin Introduction into the Scene
Bitcoin is a blockchain cryptocurrency that has the same properties as gold. Many refer to bitcoin as digital gold in comparison to other stock assets. In 2017, the price of bitcoin exceeded the price of one ounce of gold. By January 2020, the cost of bitcoin had escalated to $8700. Bitcoin features are the same as gold: it has a limited amount of 21 million tokens, and the federal government or central bank does not issue it. Bitcoin is a decentralized cryptocurrency generated by individuals and computing power verifying transactions at the Bitcoin network.
Comparing Gold and Cryptocurrency
Gold has been a haven for decades, while Bitcoin has gained widespread recognition for the last few years. Here is the comparison between the two.
- Rarity: They are both rare resources. While there are only 21 million bitcoins to be circulated by 2140, it is unknown when all gold will be mined from the earth’s surface. There are assumptions that gold can be excavated from asteroids.
- Liquidity: Gold and bitcoin have a liquid market and can be exchanged for fiat money.
Even though Bitcoin dominates, other alternative cryptocurrencies are being launched to offer more stability than bitcoin. Investors are looking for less volatility in the digital currency space.