The main concerns often expressed around bitcoin is its extraordinary volatility relative to gold and other financial assets. While it is true that bitcoin is substantially more volatile than gold and most other currencies and financial assets, outsized volatility is not always a disadvantage. Overall, outsized volatility has played a positive role to date in the growth of cryptocurrency use and adoption.
For an investor comparing bitcoin and gold, the increasing ownership of gold by central banks and governments marks a potentially crucial distinction. Interestingly, the fundamental physical-digital difference highlights some interesting advantages and trade-offs, between gold and bitcoin. From an investors perspective, the one who owns pure digital assets such as bitcoin (BTC) as a hard asset they should also consider gold.
While gold gains added legitimacy from central bank ownership, it also arguably makes it much more likely that gold would be prioritized over bitcoin in any future new monetary system.Bitcoin is entirely digital. In contrast to this, gold is one of the just over one hundred fundamental chemical elements that form the primary constituents of matter and cannot be broken down into simpler substances.
Like bitcoin, gold can be owned entirely outside of banks and the traditional financial system. Research findings also state that physical gold ownership can in some ways be likened to holding cryptoassets in non-custodial wallets. Both gold and bitcoin can be owned outside of any intermediary or third party, residing in the sole possession and control of the actual owner.
From an investment perspective, gold shares a number of attractive attributes with bitcoin and other hard crypto assets . Indeed, these similarities have led to many referring to bitcoin as ‘digital gold’, and recently a number of prominent crypto fund managers and investors have mentioned significant gold holdings alongside their bitcoin.
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Garrick Hileman, Head of Research @Blockchain.com
Dr. Garrick Hileman is the Head of Research at blockchain.com, and one of the world’s most-cited cryptocurrency and blockchain technology researchers. He created and taught the first UK class on blockchain technology at the University of Cambridge and has authored leading research on cryptocurrencies, markets, stablecoins, and broader trends. He was ranked as one of the 100 most influential economists in the UK and Ireland and he is regularly asked to share his research and perspective with government organizations and the FT, BBC, CNBC, WSJ, NPR, and other media.