Is Bitcom legitimate

Bitcoin vs. gold - what are the differences?

The value of the digital currency Bitcoin is rising and rising. Recently, the US $ 5,000 mark was almost effortlessly passed, and optimists are already dreaming of the US $ 10,000 mark.

The Bitcoin currently fulfills two important functions: The digital currency serves on the one hand as a store of value and on the other as a payment function or value transfer function, because the Bitcoin can be transferred quickly and easily across national borders.

Since the Bitcoin price has already multiplied in recent years and has emerged as an excellent store of value, many investors already see Bitcoin as a better alternative to gold - the crisis metal has served many investors as value protection and as a safe haven in recent decades.

Bitcoin vs. gold - these are the similarities

In fact, Bitcoin and the precious metal gold share some similarities. So the gold is physically limited, because the worldwide deposits in the gold mines are seen as finite. This means that producers cannot produce as many gold coins and bars as they want.

The number is also limited with Bitcoin. The last bitcoin is expected to be "mined" in the year 2140 - then around 21 million bitcoins will exist. More than 16.6 million Bitcoins were recently in circulation.

Both assets do not generate any interest, but are de facto "mined" and with a relatively high level of effort. The total cost of production (operating costs plus exploration costs for new mines) for one ounce of gold at the beginning of the year was around US $ 878.

With Bitcoin, which is "mined" through complex calculations, a high expenditure of energy is required. The costs for this have recently exceeded the mark of US $ 1,000 per Bitcoin. Since the difficulty of the calculations with Bitcoin usually continues to increase, the production costs are also likely to continue to increase.

Bitcoin vs. gold - these are the differences

With all the similarities that Bitcoin and gold share, there are also differences. For example, Bitcoin can be transferred quickly and easily digitally, but is not physically available. This in turn reduces the barriers to entry. This means that everyone who has a computer with Internet access can take part.

Gold can also be transferred, but the costs for transport and storage are higher. Although every private person can own gold today, this has not always been the case. For example, the Roosevelt government in the United States passed a gold ban in 1933, and it wasn't lifted until late 1974.

Bitcoin only exists in the digital world and is decentralized. The digital currency works via a peer-to-peer network and is based on a blockchain - so Bitcoin cannot be censored, switched off or prohibited. In addition, Bitcoin is already recognized as a legitimate means of payment in some countries, such as Japan and the Philippines, and some companies such as Expedia also accept Bitcoins as payment.

Conclusion: Bitcoin is increasingly becoming a gold alternative - but risks remain

Bitcoin has features similar to gold in order to serve as a store of value. This also includes the deflationary character of the cryptocurrency. However, there are also big differences between Bitcoin and gold. The digital currency Bitcoin - unlike gold - is already accepted as a means of payment by several large companies, and Bitcoin can be used to pay for conventional transactions with special debit cards.

Should other countries follow the example of Japan and legitimize digital currencies, this would be a big step forward, not only for Bitcoin, but for the entire crypto scene. For these reasons, Bitcoin is considered a serious competitor to gold when it comes to its function as a store of value - gold will no longer stand alone here in the future.

Nevertheless, investors must be aware of the risks associated with cryptocurrencies, some of which fluctuate greatly in value. While gold should be protected from complete devaluation - the raw material is used in the jewelry industry and elsewhere - Bitcoin can be replaced by other crypto currencies (e.g. Ethereum) and thus one day disappear into insignificance.

The gold market is weak - and yet gold is and will remain a hedge and a constant in the portfolio The gold market has shown itself to be weaker at the beginning of the new year. An amazing event, because gold is in principle an ideal crisis investment and security for your portfolio. Since the end of 2020… ›read more

© Verlag für die Deutsche Wirtschaft AG, all rights reserved