People are starting to choose Bitcoin over gold, should they?
Billionaire Investor and Galaxy Digital CEO Mike Novogratz Says Bitcoin (BTC) it is a better store of value than gold. Speaking during the investment management firm's third-quarter earnings call, Novogratz said that gold is being crushed by Bitcoin.
During the earnings call, Novogratz said gold has not lived up to people's expectations in recent years. "If you had asked gold lovers two years ago where the price of gold would be, given what happened in monetary and fiscal conditions around the world, they would all have answered much higher than here, $ 1,800," he said.
Novogratz, a well-known cryptocurrency fanatic, believes this is because there has been a substitution of Bitcoin for gold. "I still think that gold was probably an acceptable asset to own in this environment, but Bitcoin just got crushed," he explained.
It seems as if people are buying one of the newest currencies in the world rather than one of the oldest. In fact, according to the Financial Times, gold is among the worst performing assets of 2021. In contrast, Bitcoin is up more than 60% since the beginning of the year, according to data from CoinMarketCap.
Why is Bitcoin replacing gold?
Many people see Bitcoin as a form of digital gold. The idea is that, like gold, Bitcoin acts as a good store of value. A store of value is any type of asset that will not lose its value or deteriorate over time. For example, gold should it will be worth the same, or more, in 15 years than today.
Some say that Bitcoin does not function as a store of value, mainly due to its volatility. But Novogratz disagrees. In fact, he says that the fact that more than 200 million people participate in the Bitcoin ecosystem means that the question is no longer even up for debate.
"A store of value gets its value from the social construction that people agree is valuable, that I'm going to save my hard-earned money, my work, my savings in this way," he explained.
It is true that Bitcoin has great advantages over gold. It is much easier to move and much cheaper to store. It is not perfect, but, unlike gold, it can be used as way to pay.
Like gold, there is a limited supply of Bitcoin as only 21 million BTC will be produced. In a context of growing inflationary concerns, there is an attraction for assets that could maintain their value.
Why Investors Should Remain Cautious
Bitcoin certainly has some advantages over gold. But if you are looking for a safe haven for your money, Bitcoin still doesn't check all the boxes.
To begin with, Bitcoin is still a volatile asset; Ideally, a store of value should hold its value even in a financial crisis. And Bitcoin hasn't been around long enough for us to know if that will happen.
Bitcoin is currently down 30% from its high of six weeks ago, and those kinds of changes are not unusual. It is true that Bitcoin has gained value this year, but it is still a risky investment.
A big risk is the potential impact of strict cryptocurrency regulation worldwide. We know more regulation is on the horizon, but it is unclear what form it will take. It doesn't look like US or European countries are going to ban Bitcoin like China did, but the heavy restrictions could deal a major blow to the crypto market as a whole.
That said, some form of additional regulation would mean more protection for investors and could build long-term confidence. SEC Chairman Gary Gensler called crypto the "Wild West" - and not without reason. There are a lot of scams and other types of crypto fraud; For every crypto millionaire article, you will find other stories of unsuspecting investors who have lost their cash.
We mentioned that Bitcoin is cheaper to store and easier to move than gold. But the other side of that argument is that cryptocurrency platforms can be hacked. Bitcoin is easier to steal than gold, and stolen coins are very difficult to recover.
You can own Bitcoin Y gold
You don't have to choose between Bitcoin and gold, you can own both. Both assets can be part of a diversified portfolio, provided you understand the risks involved. Diversification is a great way to minimize overall risk, especially if you are not investing the money you need for other financial goals.
If you want to include Bitcoin in your wallet, you can buy it at any top cryptocurrency exchange. Just don't let talking about digital gold blind you to the potential risks.
