Gold VS Bitcoin
A new and rising currency made in January of 2009, Bitcoin has become an increasingly hot topic in investment discussions. However, we always end up looking back to our ancient currency, gold. In the modern day, which is the better short-term investment? Long-term? What are the pros and cons of each?
Gold has a reputable history, both as an ancient currency, and also as the backing for modern currency (the gold standard) in America up until Nixon ended it in 1971. It has value because it is a limited resource, which means there are only two ways to get it:
- You mine it/find it yourself, which is almost impossible today as most “finger-food” gold has already been found.
- You purchase it.
Gold has value because it is a limited resource, and it has a fairly stable demand and value throughout history. Why invest in gold?
- Gold will still have value if paper money becomes worthless/inflates.
- Gold is a safer investment that doesn’t jump too much within short periods of time.
- Gold does not increase much over time.
Bitcoin is a “limited resource” in a different, perhaps imposed, way from gold. I won’t get into the specifics of how Bitcoin mining is done, but what you should know is:
- The rewards for mining Bitcoin are reduced every four years by a factor of ½.
- The maximum amount of Bitcoin that can be produced is capped at 21 million. Once 21 million Bitcoins have been mined, there will be no more.
Why invest in Bitcoin?
- Bitcoin is secure, with things like public records of exchanges to enforce security of transactions.
- It is, for the most part, a very anonymous transaction method.
- It is not controlled by any government, unlike fiat currency.
- Because Bitcoin is a unique technology and a currency with unregulated trade, the sheer number of investors and magnitude of investments creates volatile prices. It’s not uncommon to notice Bitcoin’s unstable price jump up or down by 10% or more overnight.
"Gold is a payment in and of itself, instead of promise to pay, as compared to currencies..."