On this Tuesday, March 12, 2024, Bitcoin hovers around $72,000. The bulls are running with no end in sight. Mixed in this excitement is the talk about this cryptocurrency becoming the new gold standard due to its perceived ability to store value like physical bullion. Shared traits such as finite supply and global recognition suggest that Bitcoin is steadily progressing toward becoming an appealing alternative to gold. However, it still must complete its own maturation process before it can seriously rival the precious metal.
Earlier this year, Goldman Sachs made a compelling case for comparing Bitcoin to going in a statement. The memo designates Bitcoin as a potential successor to gold and projected its value to increase by 2.5 times in the coming years. Furthermore, Goldman Sachs sees Bitcoin as having utility beyond merely serving as a store of value. Traditionally, a store of value refers to an asset capable of retaining its worth over time, such as oil and precious metals.
What to consider
Understanding the rationale behind comparing Bitcoin to gold is crucial. Both assets share characteristics that make them attractive stores of value, and as Bitcoin continues to mature and gain broader acceptance, its potential to rival gold becomes increasingly plausible.
Global acceptance is a significant factor in comparing Bitcoin and gold. As more countries embrace cryptocurrencies like Bitcoin, albeit in the early stages, it becomes a noteworthy aspect of their comparison.
JP Morgan has highlighted several shared attributes between Bitcoin and gold, including durability, portability, and verifiability. Both assets are resilient and difficult to destroy, making them reliable stores of value. Their portability allows for easy storage and transportation, while their verifiability ensures their authenticity and value. These common characteristics underscore the rationale behind equating Bitcoin with gold and suggest their potential to coexist as valuable assets in the modern financial landscape.
Considering the backdrop
Throughout history, gold has been significant in times of turmoil and uncertainty. In periods of war and migration, people have traditionally relied on gold as a portable and universally recognized store of value, carrying it with them as a form of wealth preservation. Similarly, advocates of Bitcoin have asserted that in times of crisis, they have turned to their investments in cryptocurrency for stability and security. This parallel demonstrates the growing perception of Bitcoin as a modern-day equivalent to gold, offering a decentralized and digital alternative for safeguarding wealth in turbulent times.
The enduring history of gold speaks volumes about its resilience and timeless value. For millennia, gold has served as a global standard, maintaining its worth across civilizations. Since the 1870s, it has underpinned the international monetary system, cementing its status as a trusted asset.
In contrast, Bitcoin's journey spans a mere 14 years, and only a handful of countries have adopted it as a standard in recent years. These factors limit its widespread use.
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Present considerations
Recent fluctuations in Bitcoin's value reflect the inherent volatility of the cryptocurrency market, with frequent shifts marking the bull and bear cycles. Cryptocurrencies like Bitcoin and Ethereum have exhibited strong correlations with NASDAQ-listed technology stocks, reacting to geopolitical events and macroeconomic news, including inflation concerns.
Final note
While Bitcoin represents a groundbreaking technological advancement, it remains in the early stages of development. Unlike gold, which is renowned for its stability, intrinsic value, and global acceptance, Bitcoin is still undergoing rigorous testing, particularly in areas such as security. There is potential for Bitcoin to surpass gold instability in the future. Still, like any emerging technology, it requires time to mature and establish itself as a reliable asset.
