The comparison between Bitcoin and gold has become very common in recent times. In some occasion, investors refer to Bitcoin as a digital gold. The truth is that Bitcoin is undergoing a phase which was once undergone by gold.
Gold has been a currency for about 2000 years, unlike Bitcoin which recently started making waves. Due to its physical nature, gold is not only demanded for investment purposes but also for many other uses including the making of jewelries. Gold has established itself as a real asset, unlike Bitcoin which is severely criticized to have no real value.
One major difference between the two assets is their total supply. Gold, being a non-renewable resource definitely has a fixed supply, however, its total supply remains unknown. The supply of gold is directly dependent on its extraction rate. Logically, the increase in the price of gold motivates miners to increase its supply.
On the other hand, Bitcoin has a known total supply of 21 million of which 17 million has been mined already. Similarly to gold, Bitcoin is mined electronically and every completed block leads to the creation of a new Bitcoin. These two assets have shared features.
In a research, it was deduced that an average of 3200 tonnes of gold is mined every year, adding 1.7% to the total mined golds. According to the World Gold Council, gold has a higher liquidity as compared to Bitcoin.
Gold has a $250 billion worth of trade per day compared to the $2 billion Bitcoin worth of trade. On the ground of demand, Bitcoin’s highest demand comes from the investment industry.
Gold, on the other hand, has 50% to 60% of its demand coming from the jewelry industry. Only 30% of its demand comes from the investment industry and the rest from the tech and banks according to research.
Bitcoin market has been said to be very volatile and unregulated, unlike gold which has proved itself as a preferred candidate to be used as a store of value. Some experts also argue that Bitcoin is functionally better than gold. Bitcoin is immutable, digital and easy to access.
Despite the fact that gold has been in the system for a very long time, Bitcoin is very popular among investors, and some experts are of the opinion that Bitcoin will replace gold as a store of value in some years to come.