If you've paid attention to the Bitcoin news in recent months, you've probably heard this comparison more than once. It is a very interesting comparison to make due to the financial implications of the answer. The viral tech blog. If Bitcoin is indeed the digital successor to gold, then its current valuation is much lower than it could be.
Gold as a financial asset
Gold is estimated to have a market capitalization of US $ 10 trillion. That is an absolutely staggering amount of money for a special type of rock that we find underground. We can certainly use it to make jewelry, it is certainly quite sturdy, The viral tech blog but there is no one in the financial world who tries to argue that the value of gold is due to its uses in the real world.
The reason gold is worth so much money is that the supply is predictable. While some policies or geopolitical events can change the constant supply of gold entering financial markets, this supply is abundant enough to be used as a means of payment, The viral tech blog but not so abundant that it is worthless.
This is the peculiarity of gold
The idea that gold is valuable because it is rare is not exactly correct. Gold is valuable because it is exactly the right amount of rare. If it were too rare, The viral tech blog would not have become popular as a store of value because it would not be used for trade. The metal chosen to turn wealth into an asset could not be too rare, The viral tech blog would have made the coins too small; otherwise, it would have been difficult to give everyone even a fraction, not too large, as that would complicate transportation and exchange.
The rest is what is called in finance a network effect. Some people decided that gold had value and gladly accepted it in exchange for goods and services, prompting others to do the same, and this phenomenon has only expanded over the centuries. The viral tech blog. That is why gold is worth a lot of money.
Related: 10 Things You Should Know About Investing In Gold Funds
Bitcoin's claim to the golden throne
Gold's position as the most important asset in the world economy has been questioned in recent decades. The viral tech blog. While it was originally used to back many currencies, including the US dollar, it is ill-adapted to the modern economic system. Yet it is a testament to its strength and investors' faith that gold has vastly outperformed many markets since then.
However, Bitcoin is threatening this position. Since its inception, it has vastly outperformed gold going from less than a penny to its current state, hovering around $ 30k. It can be argued that Bitcoin is a great competitor to the gold market, easily tradable, The viral tech blog an excellent decentralization narrative that attracts millennials, and strong security with cheap transactions.
At its peak in early January, Bitcoin was estimated to be worth between 2% and 7% of the market capitalization of gold. A big jump in ten years, but still relatively insignificant. Compared to the $ 10 trillion number, cryptocurrencies as a whole have barely surpassed the $ 1 trillion market capitalization. While some consider that there is a lot of room to grow, The viral tech blog others disagree and point out the differences that will guarantee the long-term dominance of gold as a store of value. So who is right?
Related: Bitcoin breaks $ 50,000 for the first time
Bitcoin is still too young
Analysis by CryptoQuant, an analyst of crypto markets, shows that Bitcoin's realized market capitalization is actually much lower than you might expect. He takes into account that many coins are lost forever and some have not been moved in years. Regarding this, Bitcoin is still only around 2% of the estimated market capitalization of gold. If it moved to 10%, the price per Bitcoin would be $ 154,000.
So we are still very early in the life of Bitcoin and it is certainly not yet replacing gold. Gold still has centuries behind it as a store of value assets and, The viral tech blog as we have seen, what really matters with gold is not the real-world use cases so much as its long tradition of safe assets that individuals, states, and corporations use storing their money for the long term.
Bitcoin is twelve years old
There simply hasn't been enough time to declare Bitcoin as the next store of value. Is it better adapted to the digital age than gold? Certainly. Is it easier to change it and transform it into real dollars? Absolutely. The viral tech blog. Will it outperform gold over the next year? Very possible. But to become the de facto store of value, you need something that price action and technology cannot replace. Investor confidence. And that takes a long time to build.
