Bitcoin Vs Gold: Here’s How The Debate Looks In 2021
By David - February 02, 2021
The Bitcoin vs Gold clash is heating up as Bitcoin is getting more attention due to its price skyrocketing and institutional investment coming into crypto. This debate is a clash in perceived value between the old and current generation.
The millennials who are team Bitcoin are struggling to see why people would buy gold — and are even calling it shiny rocks…
While it’s clear that people know what Bitcoin and Gold are, many don’t understand what’s at the root of the debate — a disagreement in investor psychology:
Hedging vs Hodling
Majority Gold Investors: Invest in gold to protect their money from fiat inflation.
Majority Bitcoin Investors: Invest in Bitcoin as a means to grow their money short-term or long-term.
2 completely different types of thinking.
The gold investors aren’t really concerned about ROI, they just care about Gold keeping their money intact when fiat currencies fail.
Bitcoin investors are more focused on doubling, tripling, and 10xing their money. If they cared about hedging more, they wouldn’t mind if bitcoin stayed in a range of $15,000 to $25,000 over the next 50 years.
An image that secretly represents the investor dichotomy happens to be the meme of Peter Schiff:
This meme is used to poke fun at Peter and his commitment to hold Gold while Bitcoin does enormous gains. But, everyone is missing the fact that Gold retained all of its value in the meme above. If Gold protects your money, it did what it was designed to do in a fiat-based world — hedge.
So now, the lack of understanding by both communities/generations has transformed the debate into which is better for both hodling and hedging.
Here are the factors motivating this discussion:
Gold’s Relevance In The Digital Age
Before our eyes, we are seeing the digitization of many things in our societies. From communication to education. Plus, very soon, physical cash will be redundant as fiat currencies will be completely digital.
The digitization of money does make Bitcoin more valuable as Bitcoin lets you have 100% full control over your digital money via private keys.
Bitcoin has already established itself as the people’s money, and the newer generations choose it over gold as a store of value.
Despite gold having intrinsic value, the community ultimately determines what a store of value is.
For example, in some African countries, mobile phone credits are a store of value and that isn’t the case in most places in the world.
Also, just because Gold has had a successful track record hedging against inflation since the invention of fiat currency, it’s not guaranteed to always be the best hedge investment out there. Especially when the digital world is becoming more influential every day.
However, Gold happens to be on the blockchain through PAXG, so interesting to see how this initiative influences and educates newer generations on the value of gold.
Gold’s Intrinsic Value and Use Cases In 2021
Here’s are the current use cases for gold right now:
The major issue is that all these fields are actively finding ways to use gold less or substitute it in the future. This is obviously due to gold’s rarity and expensive price.
So, with the world planning to use gold less, it will surely impact gold’s value in the coming decades.
Why People Will Still Buy and Hold Gold In 2021
Because it’s physical
As human beings, we feel more in control of things we can hold, touch, smell, and see.
Remember the image we showed earlier of Peter Schiff and Bitcoin going from $1 to $1,000,000? At the cost of those gains are uncontrollable volatility and massive dumps.
We don’t know how institutional investors will react to Bitcoin losing 50% or more of its value in 1 day — just as we saw Bitcoin go all the way to $3,000 in early 2020.
Huge investors may pull out if more crazy price drop event takes place.
Bitcoin Is New
Bitcoin is a teenager — 13 years old. It might have the longest blockchain ledger, but that’s incomparable to the time gold has been around. We still haven’t seen how Bitcoin will react to future regulations, restrictions, and threats.
For example, the expansion of bitcoin mining facilities in some areas is resulting in lawsuits, and this could increase when Bitcoin becomes more mainstream.
The Futures Market’s Future Influence on Bitcoin
In 2017, when Bitcoin reached its ATH of $20K, that happened to be the point when the CME Group launched Bitcoin futures. Since then, Bitcoin has been extremely volatile.
Plus, it doesn’t help that the CME Group’s intentions are to tame Bitcoin.
Bitcoin’s Fixed Supply of 21 million Is Questionable
Yes, bitcoin does have a limited supply of 21 million but when you count bitcoin futures, the supply is practically unlimited.
The community never seems to separate the 2, and that’s a major concern.
For example, the crypto community celebrated when Paul Tudor bought millions of “bitcoin”, but the truth is he didn’t — he was buying bitcoin futures.
The crypto community never question if large investors are buying BTC on exchanges, or if the bitcoin futures they’re buying are settled through real bitcoin.
We’re still yet to see how the maturation of bitcoin futures affects bitcoin long-term.
Some investors will prefer gold simply because it’s more predictable.
Can Bitcoin Ever Be The World’s Reserve Currency?
While it’s clear that gold is unfit to replace fiat as it can’t be transferred digitally, it’s still unclear if bitcoin could replace it too. Here’s why:
- The masses aren’t ready for a world where things are valued by zeros, naughts, and more zeros. It only makes things more complicated.
- Bitcoin transactions still take around 30 mins for a confirmation.
- Bitcoin is just too volatile.
A crypto stablecoin has a much better chance of fulfilling a world full of decentralized payments.
Future Circumstances That Give Bitcoin Advantages Over Gold
Smart cities are in development all around the world, and this will emphasize the value of tech in future generations. Plus, there are billion-dollar smart cities being built with crypto as the foundation such as Akon city:
If the initial crypto smart cities become successful use cases, you can almost guarantee that more will pop up everywhere.
Can Bitcoin and Gold Exist Without Each Other?
It’s safe to say that they both hedge against the dollar as they perform great when the U.S Dollar Index goes down.
They both have their pros and cons, but in a world moving towards digital dominance, bitcoin is positioned to usurp gold’s throne.
At the same time, gold is undefeated throughout history.
Time will only tell if bitcoin and gold continue to go to war, or they co-exist by respecting each other’s boundaries and fight against fiat currencies together.
The communities of the old and young decide.
What is CoinMarketMan (CMM)?
This is a platform that helps traders become profitable by automatically journaling their trades to provide statistics exchanges don’t have.
For example, with CMM, you can see:
- What days and hours you’re most profitable
- The trade setups that are constantly winning or losing
- The duration of your winning and losing trades
- And much more!