Exploring Bitcoin: Is It Truly the Gold of the Digital Age?

Bob Steveson
July 23, 2023

In recent years, Bitcoin's price surged, approaching $70K perunit. This significant increase led many to label it as "digitalgold," indicating a perceived resemblance with the tangible precious metal. Gold, despite fewer practical applications compared to itscounterpart silver, maintains a high value due to its unique properties.

This metaphor isn't unique to Bitcoin, though; similar comparisons are commonplace in financial circles,with oil for example often referred to as "black gold". That’swhy we wanted to dive deeper into the analogy betweenBitcoin and gold, and ask whether Bitcoin- which we offer for buying and selling on ourplatforms at Voltcoins - genuinely merits thelabel it has been given.


•  Both Bitcoin and gold canserve as hedges against inflation. Their prices, often denominated in USdollars, tend to rise when the US dollar weakens, often due to actions of theFederal Reserve. However, the pace of this ascent can differ substantiallybetween the two.


•  Both are subject tovolatility, although to varying degrees. In the short term, Bitcoin and goldprices can fluctuate, impacted by geopolitical tensions, energy market events,and other external factors. However, their long-term trends suggest growth invalue. Despite recent downturns, Bitcoin still boasts a value exceeding $20kper unit—a substantial leap from its initial price.

Similarly, gold is nowhovering above $1800 per ounce. With more historical data available for gold,one can assume that if Bitcoin continues to gain popularity, it's plausible toforesee continued growth.


•  Neither Bitcoin nor goldgenerates dividends. Unlike company shares, these assets only provide returnsthrough appreciation. Consequently, gold is viewed as a means to preservewealth—a role Bitcoin could also fulfil, given its high price from the initialstarting point.


•  Both Bitcoin and goldcounter the concept of fiat money. Those skeptical of fiat currencies, such asUSD or Euro, often turn to alternatives like cryptocurrencies or gold. Thelimited supply of both Bitcoin and gold exerts upward pressure on their prices.


•  Security and storage draw amajor distinction between gold and Bitcoin. For gold, one needsa secure place for storage. That can be a homesafe or a bank locker, but keep in mind that both of which are susceptible totheft. Bitcoin, on the other hand, is stored digitally and can be kept securethrough strong encryption techniques. Having said that, loss of access keys can make Bitcoin irretrievable.


•  A notable difference lies inthe risk profile of the two assets. Gold is often a "risk-off" asset,with investors turning to it amid economic uncertainty, while Bitcoin, a"risk-on" asset, typically reacts adversely to such conditions.


•  Fundamentally, Bitcoin is adigital asset, whereas gold is physical. This difference has significantimplications for their transferability. Bitcoin can be moved easily betweendigital wallets, while transporting physical gold from one location to anotheris considerably more challenging.


•  Finally, the markets inwhich gold and Bitcoin arebought and sold also vary greatly. Gold has been boughtand sold for thousands of years and has a globalmarket with established rules and regulations. Bitcoin, by contrast, is anewcomer, and its market is still developing. This difference results inBitcoin markets being more susceptible to manipulation and fraud.


To conclude, Bitcoin and gold indeed share several parallels, andthere's plenty of positivity surrounding Bitcoin, available for purchase on ourplatform, Voltcoins. A prudent strategy might involve holding both assetslong-term, given their historical tendency to appreciate in value over extendedperiods.

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