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Gold, which has been highly valued for thousands of years, has captivated people throughout history and is often seen as a safe haven against geopolitical uncertainty and market volatility. With the recent rise of cryptocurrencies, Bitcoin has appeared as the preferred token in the crypto-sphere to fight centralized monetary decisions from governments.
While Gold and Bitcoin are increasingly actively traded through trading apps and other platforms, they are also used as long-term investment opportunities, especially when it comes to finding a way to fight issues with the existing money system.
That’s why some people believe that the BTC token plays a similar role to Gold and that the token could eventually replace Gold as a safe haven asset. But is that really possible? Well, perhaps, as there are some interesting similarities between Bitcoin and Gold.
Firstly, Bitcoin is rare like Gold, which makes it a potentially worthwhile hedge against inflation (which is currently reaching record levels around the world). Bitcoin has a total supply that is limited to 21 million tokens. In addition, every 4 years the pace at which new BTC coins are released slows down, through a process called “halving”. Even though Gold is not the most scarce precious metal, it is still difficult to discover and extract it in substantial amounts, which makes Gold a valuable and limited commodity.
Secondly, both Bitcoin and Gold exist outside traditional monetary systems and can be used as a way to fight interest rates and money supply manipulation from policymakers. Unlike traditional currencies, Bitcoin and Gold cannot be influenced by central bank decisions that strongly impact the value of fiat currencies through monetary policies.
Since the 2007 economic crisis, governments around the world have adopted ultra-accommodative fiscal and monetary policies to support their economies, which have weighed on the value of their currency, as printing money has been used to avoid financial meltdowns. But more recently, central banks have started to adopt tighter monetary policies to fight rising inflation, removing monetary stimulus from their economies, which has pushed the value of their currency upwards.
Final word
Gold has always been the ultimate asset for wealth preservation, as well as the optimum option for securing your portfolio in times of uncertainty. Even if Bitcoin shares some similarities with Gold, it is too volatile to hope to replace Gold today.
However, it isn’t impossible for the token to become a safe asset in the future. It is especially true if you think of Bitcoin as the technology of the future, considering its growing role in payment networks and transaction processing around the world, and if you believe that its adoption rate will keep rising.
It might still be relevant for you to add cryptocurrencies like Bitcoin to your portfolio to profit from this asset class and better diversify it with alternative investments, in order to reduce your overall risk.
If you’re seriously thinking about buying Bitcoin, Gold, or any other asset for that matter, remember to first think about your trading and investment strategy, your financial goals and your risk tolerance, to be sure they fit your trader profile and risk appetite.
