With Bitcoin blasting through one all time high after another and major financial players jumping on the bandwagon in search of yield and security during the pandemic, I've read plenty of stories about how Bitcoin will replace gold as the new standard for storing value. The thing is, when looking at their characteristics as a commodity gold beats outs Bitcoin in a number of fields.
Gold isn't just a pretty face
While gold is best known for it's use in jewelry or as ancient currency, it also plays a major part in industry as well as you can see below.
If you're reading this on a smartphone right now, you're holding a tiny bit of gold. Gold has excellent properties when it comes to conductivity and malleability, it is chemically inert and does not tarnish. Even when mixed with other metals it keeps many of these properties, which leads to gold being used in some form in industries as wide ranging as health care to aerospace. Even if gold were to lose its favored place in human civilization for its beauty, there would still be great demand for this mineral. Unless someone figures out how to make a synthetic gold (and believe me, some have been trying for a long time), this rare element will always have significant value.
Bitcoin, on the other hand, is already facing other coins that can perform better at it's core functions.
Coming for the King
While being the first cryptocurrency in existence and acquiring wide acceptance is very important, Bitcoin is falling behind other coins in a number of major fields. While not initially meant to be a competitor to Bitcoin, ETH on its own has faster transactions and an ability to work with smart contracts, and depending on how well Ethereum 2.0 works at cutting down gas costs could also beat out Bitcoin on transaction costs. Then you have a number of projects like Litecoin, Dash, Tezos, Monero, and Stellar among others that look to improve on Bitcoin's model either as forks or entirely new protocols.
While Bitcoin still works very well as a storage of value and peer-to-peer transaction system, these properties are no longer exclusive to it alone. With the industry slowly moving towards proof-of-stake models, there is a question of how long proof-of-work mining will make economic sense as related costs increase and the rewards decrease due to halving.
Bitcoin isn't going anywhere (yet)
Now, I'm not arguing that Bitcoin is going to crash tomorrow, far from it. I can see the current bull run going on for some time, though a correction in early 2021 is absolutely possible. My argument here is that it should not be equated with gold when it comes to being a long term storage of value.
Gold is a natural element that as been sought after by humanity since ancient times, Bitcoin is a recent technological creation that's just entering puberty. While its' locked in rarity and growing acceptance will help maintain Bitcoin's value in the near term, the simple fact is that everything it does something else can be created to do. Someone today could create Bitcoin, but you can't create gold.
Thinking about it, a better comparison for Bitcoin would be diamonds instead of gold. We have been able to make synthetic diamonds for decades now for a much lower cost than natural diamonds but thanks to tradition and effective marketing by the DeBeers family they only make up a fraction of the market right now though that number is growing. Bitcoin is in a similar place right now, with market sentiment and its' wide acceptance driving much of its' value. The question becomes how long can it can maintain its position as the first thing people think of when you mention crypto?
Right now I'm viewing Bitcoin as a medium term play, holding on to some and using the rest to play on the volatility of the market, but I'm not counting on it for retirement in a few decades. I'll be taking my profits when I can, and if you were lucky enough to get in at under 10K earlier this year I would strongly suggest looking into taking some money off the table now if you can get back the money you put in and still have plenty of coin left. As crypto in general becomes more popular it is likely to face more regulation, which could cause everything to crash back down again depending on how heavy a hand world governments decide to take.
Of course, I could always be wrong and it could hit $100K by the summer, but long term I have my concerns that Bitcoin in it's current form will not be able to keep up with advances in technology while gold will always still be gold.
Story thumbnail by Michael Steinberg from pexels.com
