BTC vs GOLD: A Comparative Analysis of Two Stores of Value for INDEX:BTCUSD by IkkeOmar
Bitcoin and gold are both commonly considered stores of value. Many alt coins also claim to be a store of value
After the recent banking issues in the world, we have seen these stores of value shoot to the sky in valuation.
This got me thinking a bit about the old question, “What is best? BTC or Gold?”
I believe this question really bases on the fundamentals for digital value vs physical value
I will try to examine the pros and cons of each store of value and analyze what factors determine their price.
Bitcoins as a Store of Value
The technology provides a secure and transparent method of transferring and storing value. Some of the pros of having a digital store of value for money include ease of use, low transaction costs, and borderless transactions. However, there are also some cons to consider. One is the security concerns is simply that there are some technical attack vectors to mint infinite coins, which would completely destroy the demand.
This article writes about it: https://medium.datadriveninvestor.com/itcoin-unhackable-it-happened-twice-not-blowing-smoke-9e16bcddd5ab
Another is the lack of regulation; since there is no central authority controlling Bitcoin , the value of Bitcoin can be volatile. A lot of people hate on CRYPTOCAP:ETH for being more at risk of being centralized after it’s fork to proof of stake, however this is actually to avoid the issues with governments. I believe institutions will be integrating ETH more than they would BTC , because it’s becoming greener after proof of stake, and because it is easier to regulate.
I understand the point of actually wanting decentralization of money, but I also see the limits in regards to how we intergrate it into the world.
What has done best?
BTC has been outperforming GOLD for most of the time since it’s inception:
This chart shows the price of BTC compared to GOLD , when it goes up, it means BTC is getting more expensive compared to gold
The correlation between BTC and GOLD is, unlike between the US dollar , varying. However, in times of termoil, we see them have the same direction in the short-mid term.
Gold as a Store of Value
Gold has been used as a store of value for centuries. Some of the pros of having a physical store of value for money include its durability, scarcity, and intrinsic value. When it comes to the practical use for GOLD , we really only see it being used for central aspects in electronics. One issue of gold is the storage and transportation costs, which can be significant. Another is the vulnerability to theft, as gold is a physical asset that can be stolen. Furthermore, the whole point of this discussion is to see what is better if someone wants to keep custody of their money, how is the value best stored?
You can’t just keep large amounts of GOLD in your house!
Determinants of the Price of Gold vs Bitcoin
The factors that determine the price of gold include supply and demand , inflation , geopolitical events, and the strength of the US dollar .
The factors that determine the price of Bitcoin are different. They include supply and demand , mining difficulty, regulation, and adoption. Unlike gold , which has a finite supply, Bitcoin has a fixed supply cap of 21 million coins. The mining difficulty of Bitcoin also affects the price, as mining rewards decrease over time. The regulation of Bitcoin also affects the price, as some countries have banned or restricted its use, while others have embraced it. Adoption is another factor, as the more people and businesses that accept Bitcoin , the more valuable it becomes.
The simplest way of putting it, BTC is an excel-sheet, that keeps track of all the transactions, and users pay miners to keep it running
Okay Omar, so what now?
Well… I am not a financial advisor, but I want to share my insights on which direction they both might be going in the mid-long term:
My TPI on BTC is super bullish on the 1D, it is at the value 1, which is the most buillish it can be, this means we are still bullish for the mid-term until we see weakness in the Trend Probability Indicator.
When it comes to gold , it’s actually the same story. We are currently in a time where people are losing trust in the financial institutions. This means that these stores of value, in the short-term, will have to push a bit higher, because demand for these is up!
Notice the correlation between GOLD and BTC is roughly 0.59 at this current time, which is actually higher than some altcoins!
I’d love to hear your thoughts, give me some contructive critism!
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