It was a great time to own Bitcoin (CRYPTO:BTC). Since the start of 2023, the leading digital asset has climbed 307%. Approval of spot exchange-traded funds (ETFs), as well as April cut in halfhave been recent catalysts.
Investors might be surprised to learn that gold is also close to records thanks to bullish sentiment. Bitcoin and this precious metal are often compared. But the leading cryptocurrency is a better asset to own.
How Bitcoin and Gold are Similar
Market participants like to compare Bitcoin and gold. So it might be helpful to start by understanding some of the similarities between these two.
Scarcity is an issue that investors need to be aware of. Bitcoin’s software indicates a supply cap of 21 million coins. And in the earth’s crust there is a certain amount of gold.
The prices of assets with a fixed supply should, in theory, increase as demand also increases. This basic economic principle helps explain why gold has been considered a popular store of value for long periods of time.
Additionally, there is some utility here as well. Gold is mainly used in jewelry, but it is present in certain industrial settings. Likewise, the value of Bitcoin lies in the fact that it is a completely decentralized network with no single entity in charge, thereby reducing transaction costs while sending money to someone across the world .
The advantage of Bitcoin
At a high level, it’s easy to see how scarce Bitcoin and gold are. Additionally, they are both useful in different situations. But if we dig deeper, we’ll easily see how the best crypto is a superior investment.
Let’s return to the subject of scarcity. Investors might think that gold has a fixed supply cap, but that couldn’t be further from the truth. According to the US Geological Survey, 77% of all gold in the Earth’s crust has been mined. Therefore, there is still a significant amount of gold to be mined.
If, for some reason, demand for gold increased in a short period of time, mining companies would be incentivized to invest aggressively to expand their operations to target areas of the world that might be difficult to access. In other words, the gold supply schedule could be changed depending on changes in demand.
This is where Bitcoin stands out. It’s absolutely finished. The previously mentioned supply cap of 21 million coins is very unlikely to change, unless Bitcoin stakeholders want to completely undermine the value proposition of the entire network. Since Bitcoin’s supply schedule cannot be changed, its price is generally volatile.
Compared to gold, which is a physical commodity, Bitcoin is a digital asset. And that means it’s easier to store and transport. Bitcoin can also be divided into much smaller units, while still being acceptable in some transactions. Try going to a restaurant and cutting out a gold coin to pay the bill.
Investors should also not ignore the store of value debate, which is probably the most talked about aspect when comparing Bitcoin and gold. Here, Bitcoin shines brighter than the precious metal.
Ultimately, saving and investing is about increasing your purchasing power over time. Over the past five years, the price of Bitcoin has risen 718%. This means that a $1,000 investment in June 2019 would be worth almost $8,200 today.
In contrast, the price of an ounce of gold only increased by 73% during the same period. And this period has been marked by major disruptive events, such as the pandemic, inflationary pressures, rising interest rates and general economic uncertainty.
In the future, Bitcoin and gold will likely continue to be compared. But I think over the next five or ten years, the leading cryptocurrency seems to be the best investment opportunity.
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Neil Patel and its clients have no position in any of the stocks mentioned. The Motley Fool posts and recommends Bitcoin. The Mad Motley has a disclosure policy.
Here’s why Bitcoin is a better investment opportunity than gold was originally published by The Motley Fool
