Gold

Bitcoin

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<p><strong>Have you ever been advised to buy gold to protect against inflation? You might want to read this article.</strong></p>
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<h2 id="h-a-significant-difference">A Significant Difference</h2>
<p>The supply of <a href="https://www.cointribune.com/halving-bitcoin-levenement-tant-attendu-est-enfin-arrive/" target="_blank" rel="noopener noreferrer nofollow">bitcoins</a> is absolutely limited. <strong>But gold is only relatively rare.</strong></p>
<p>Indeed, bitcoin (also known as digital gold) is capped at <strong>21 million BTC</strong>, and nothing can ever change this limit. Moreover, bitcoins that have been lost make them <strong>even more scarce.</strong></p>
<p>This is one of the reasons why bitcoin is <strong>often referred to as digital gold.</strong> It leverages 21st-century technology to mimic the valuable properties of physical gold from the past.</p>
<p>Although both types of gold can convincingly serve as a store of value, there are also significant differences between the two.</p>
<p>Despite the similarities between bitcoin and physical gold, bitcoin is superior because of its truly limited supply. <strong>There will never be more than 21 million bitcoins, making it a superior asset.</strong></p>
<h2 id="h-bitcoin-and-digital-gold">Bitcoin and Digital Gold?</h2>
<p>One of the main reasons bitcoin is often dubbed digital gold is its ability to leverage 21st-century technology to <strong>replicate the valuable properties of physical gold.</strong> This innovative approach sets bitcoin apart, <strong>impressing with its capacity to adapt and evolve in the digital era.</strong></p>
<p><strong>Gold is not just any ordinary product either.</strong> While many think that gold is limited, in reality, gold mining activities can alter the supply. <strong>For example, the gold discovered in Uganda in 2022 nearly matched the total amount of gold above ground at that time.</strong></p>
<h2 id="h-bitcoin-and-volatility">Bitcoin and Volatility</h2>
<p>Bitcoin has certainly experienced <strong>its share of volatility</strong> (particularly in its early years of existence), yet its value has generally tended to increase over time, as it has become more widely adopted. On average, it has returned <strong>671% annually</strong> (as of February 2024) since its creation.</p>
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<p>The reason for this growth: <strong>proponents of digital gold believe it is a better store of value and a better protection against inflation than physical gold.</strong></p>
<p>Gold has proven to be a relatively reliable investment over time and is often regarded as <strong>a safe haven in times of market volatility.</strong></p>
<p>Peter Burns writes in Money: “Gold is not an asset that generates income, but it can serve as a <strong>store of value when its price appreciates over time</strong>. The average annual return of gold globally between 1971 (the year the United States stopped pegging the price of gold to the dollar) and 2022 was 7.78%.”</p>
<p><strong>In the meantime, the value of bitcoin has soared.</strong></p>
<h2 id="h-factors-affecting-the-price-of-btc">Factors Affecting the Price of BTC</h2>
<h3 id="h-the-role-of-demand">The Role of Demand</h3>
<p>As with any other asset, the value of bitcoin is influenced by <strong>the secular forces of supply and demand.</strong> By definition, supply is always finite, so <strong>its value increases as demand grows.</strong></p>
<p>The bitcoin issuance schedule is unaffected by price and demand, <strong>remaining constant regardless of market dynamics.</strong></p>
<h3 id="h-geopolitics">Geopolitics</h3>
<p>The value of digital gold rises in response to positive news, adoption by major corporations, and regulatory endorsements that bolster investor confidence. <strong>Conversely, negative news, security breaches, or regulatory clampdowns can drive bitcoin prices down.</strong></p>
<p><strong>Inflation rates, economic stability, political uncertainty,</strong> or currency fluctuations can all influence the perceived value of bitcoin as a store of wealth or hedge against traditional financial systems.</p>
<h3 id="h-halving">Halving</h3>
<p>Bitcoin’s supply is finite, with a total cap of 21 million tokens. Periodic events known as <strong>“halvings” occur about every four years,</strong> reducing the rate at which new bitcoins are created. <strong>Historically, this phenomenon has preceded bitcoin bull markets.</strong></p>
<h2 id="h-factors-affecting-the-price-of-gold">Factors Affecting the Price of Gold</h2>
<h3 id="h-the-role-of-supply-and-demand">The Role of Supply and Demand</h3>
<p>Like bitcoin, the price of gold is influenced by <strong>supply and demand in the global market.</strong> When demand outweighs supply, the price tends to rise. <strong>One of the main differences is that this can lead to an increase in gold mining and production.</strong> Bitcoin, on the other hand, has a <strong>fixed limit.</strong></p>
<h3 id="h-investor-sentiment">Investor Sentiment</h3>
<p>Gold is often seen as <strong>a safe haven</strong> in times of economic uncertainty or market volatility. This rise (or decline) in <strong>uncertainty</strong> can affect its value.</p>
<h3 id="h-interest-rates-and-inflation">Interest Rates and Inflation</h3>
<p>When interest rates are low (or inflation is high), investors may <strong>turn to gold as an alternative investment,</strong> which can push its value up.</p>
<h3 id="h-exchange-rates">Exchange Rates</h3>
<p>Fluctuations in exchange rates can affect the price of gold. When the value of a currency decreases compared to other world currencies, the <strong>cost of gold in that currency can rise.</strong></p>
<h3 id="h-central-bank">Central Bank</h3>
<p>Central banks often hold large amounts of gold in reserve. The buying or selling of gold reserves by central banks <strong>can have an impact on the supply and demand dynamics in the market.</strong></p>
<h3 id="h-industry">Industry</h3>
<p>The demand for gold for <strong>jewelry</strong> and other industries can also impact its value.</p>
<h2 id="h-bitcoin-and-the-21-million-limit">Bitcoin and the 21 Million Limit</h2>
<p>The existence of a predictable supply prevents inflation and <strong>ensures that an asset retains its value.</strong></p>
<p>Bitcoin has a finite and capped supply – only 21 million units will ever exist since this supply cap is hardcoded into the rules of its underlying protocol. <strong>The finite supply is key to bitcoin’s long-term value.</strong></p>
<p>Gold is also rare because it is hard to find and is usually only available in low concentrations, as it requires processing a large amount of rock to obtain.</p>
<p>The scarcity of gold, its non-renewable nature, and the difficulties encountered in its extraction <strong>largely explain gold’s value.</strong></p>
<p><strong>However, the amount of gold available at any one time fluctuates.</strong> Investment researcher Nathan Lewis writes: <strong>“In terms of availability, [gold] is very abundant.</strong> We actually have twice as much gold above ground today than when the world left the gold standard in 1971. We have seven times more than in 1910″.</p>
<p><strong>Bad news for gold’s ability to serve as a store of value:</strong> In June 2022, Ugandan authorities revealed a significant discovery of about <strong>31 million tonnes of gold ore in the country (320,158 tonnes of refined gold)</strong>. The approximate value of this ore was <strong>12 trillion dollars.</strong></p>
<p>This single discovery represents more than the total amount of gold above ground accounted for in the total supply. <strong>As this gold continues to be recovered, it will significantly dilute the scarcity properties of physical gold.</strong></p>
<h2 id="h-bitcoin-and-divisibility">Bitcoin and Divisibility</h2>
<p>High divisibility allows for <strong>dividing an asset into smaller units, which facilitates transactions of any amount.</strong></p>
<p><strong>Bitcoin</strong>&nbsp;is far more divisible than most currencies. A single bitcoin can be <strong>divided to eight decimal places,</strong> with units called <strong>satoshis</strong>. This allows for cost control.</p>
<p>When you divide <strong>gold</strong>&nbsp;into small quantities, you will pay more. <strong>One-hundredth of an ounce of gold can cost about $35 online,</strong> which equates to a gold price of $3,500 per ounce, representing <strong>a markup of 75% over the actual price of gold at that time.</strong></p>
<h2 id="h-buy-btc-not-gold">Buy BTC, Not Gold</h2>
<p>Consider your personal preferences and risk tolerance when contemplating the choice between bitcoin and gold. If you <strong>enjoy technology</strong> and are comfortable with the digital world, <strong>bitcoin may be a perfect fit for you.</strong></p>
<p><strong>Gold may be a better choice if you want physical currency and prefer tangibility.</strong></p>
<p>Diversification is still an option. Consider allocating <strong>a portion of your wealth to digital gold, which offers liquidity, ease of transfer, and growth potential.</strong> Add some physical gold to add <strong>an extra layer of stability and to safeguard against economic uncertainties and bitcoin’s volatility.</strong></p>
<p>Michael Saylor, founder of MicroStrategy, states:</p>
<p><em>“Bitcoin is more efficient than gold. It is more efficient than fiat currency. It is more efficient than storing your money in an Airbnb-rented apartment. It’s simply the most efficient energy system, and rational people around the world are looking at it and thinking: <strong>‘Why wouldn’t I want to store my money in a property that is the supreme property of the human race?’</strong></em></p>
<p>Jurrien Timmer, director of Global Macro at Fidelity, has found that an allocation of just 1% of a traditional portfolio to bitcoin produced effects similar to a 4% allocation to gold. In other words, <strong>by including bitcoin, investors could potentially do more with less in their “store of value” portfolio allocations.</strong></p>
<p>The team at Cathie Wood’s Ark Invest discovered that <strong>the optimal allocation to bitcoin is 19.4%</strong>.</p>
<p><strong>Bitcoin is gaining popularity as a long-term investment option and could outperform gold. However, do your own research, assess your risk tolerance, and invest accordingly.</strong></p>

Do Not Buy Gold!

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