Assets have grown to be a major investment tool for users in the financial system representing certain wealth values. Once acquired, individuals expect their assets will provide a future benefit. In the past, gold played a part in the monetary system, acting as a standard currency representing a fixed amount of gold per currency unit.
Cash came along, later on, to act as a medium of exchange and a regular currency in the form of paper and coins backed by a national government. Moving forward to 2009, the inception of Bitcoin was at hand, bringing the concept of an electronic currency running on a decentralization architecture and blockchain technology.
Now with three assets, their fungibility levels raised questions on how individual units of the investments will remain interchangeable since, in essence, fungible assets make trading and exchange easier. As the financial market expands, the demand for smaller equal units of an asset increases to enable a convenient trading experience.
Bitcoin
Introduced in 2009, Bitcoin is known to be the first digital currency in the cryptocurrency market. The peer-to-peer platform is built on a distributed LEDGER whereby users get to view past transactions by other traders. Within the blockchain resides nodes scattered across the globe to maintain the public ledger. Bitcoin's value continues to surge tremendously, moving from a mere buck to a current price of $53 968.
Cash
Fiat money, commonly known as cash, mainly operates as a nation's government's legal currency. Through the cash, a government can exercise exclusive control over the market since it is responsible for minting the currency using its respective Central Banks.
Gold
Gold is a precious metal found beneath the earth's crust possessing attractive features that make it a valuable asset. As an asset, the mineral is widely accepted as a tradeable instrument asset capable of acquiring goods and services.
Bitcoin vs Gold
Scarcity
Bitcoin remains a scarce digital asset, especially because it contains a maximum supply of 21 million BTCs. Enthusiasts today are shifting their focus towards Bitcoin investments, one of them being Tesla and Grayscale Investments.
The two companies managed to accumulate bitcoins worth billions as an investment tool. Through institutional buying and other market factors, BTC's value continues to increase as the coins decrease in the market, ultimately making it a rare digital currency.
The case is similar for gold as a short supply in the mineral across the market makes it a scarce item worth a fortune. Furthermore, gold is extracted in specific areas with the mineral's presence, therefore, explaining its scarcity level.
Natural State
Both assets take a specific form in that Bitcoin is purely a digital currency with its data represented on the distributed ledger.
It further means that the leading virtual asset is highly durable and secure as nodes work to safeguard the entire network. On the other hand, gold is a tangible asset incapable of corroding, rusting, or degrading for a long time.
Divisibility
Bitcoin and gold are divisible into smaller proportions whereby a user can attain a fraction of the asset. For instance, in a trading market, users need access to a proportion of bitcoin since the consumer may not be in the capacity to acquire the whole asset.
When traders head to exchange platforms, they can buy 0.01 BTC, which goes for $54.06 at the moment, rather than buying one BTC for $54,059. Similarly, gold is divisible into smaller increments, whereby users can now buy an ounce of the precious metal at $1,698.
Fiat vs Bitcoin
Volatility
Bitcoin is undoubtedly a volatile cryptocurrency with irregular price momentums. It is possible to witness the value of the digital asset going up or down within one night. The 2011 price bubble is one such scenario where the king coin managed to move from $1 to $32, an increase of 3200% within three months. Fast forward to 2017, and Bitcoin experienced another volatile swing as the asset hit $20,089 by December, a surge from $975 in March the same year.
For fiat currencies(cash), the government controls its circulation hence less likely to experience a volatile pattern. Governments can print money that will meet the market and population's demand, mainly during a crisis, in a bid to stabilize the territory's currency. Nonetheless, an excessive supply of money in an economy can lower the value of the currency.
Medium of Payment
Bitcoin and physical cash can be used to purchase commodities in the market. Trust is a key element in both mediums before initiating any transactions to build an effective payment system.
As explained before, cash remains the most used currency for payments since it is a legal tender authorized by the government, unlike bitcoin. However, the tables are tuning nowadays as many users prefer using bitcoin to pay for their goods and services instead of fiat currencies.
The reason being, bitcoin brings a fast and convenient way to send money locally and internationally at lower fees.
Noncounterfeitability
Cases of counterfeit money swarm the media every day as fraudsters find new tactics of improvising fake money. As a result, consumers fall for the mischievous schemes, which bring about scam cases and numerous financial crimes.
Bitcoin is built so that no single entity can forge or duplicate the digital currency unless it is a 51% attack, which is less likely to succeed.
Cash vs Gold
Border Limitations
Gold is a borderless currency widely acceptable anywhere globally, as long as it is authentically verified. For years now, gold continues to be adopted by institutional and retail investors in the global market as a store of wealth and a currency.
Fiat money may encounter some limitations, particularly when trying to utilize a foreign currency in another country. These limitations force the user to exchange and obtain the legitimate currency used in their preferred territories.
Ownership
Once you deposit gold in a financial institution, the valuable metal exclusively belongs to you. Therefore, users can claim their gold assets at any point in time without any ownership restrictions. On the other hand, cash deposits work differently because the bank owns and controls all the finances in the institution.
If, for example, the bank is facing bankruptcy allegations, the financial institution will use all the deposit balances to pay creditors. Moreover, suppose the banking customers demand their deposits simultaneously. In that case, the financial institution will either pay them back in smaller amounts or not be in a position to refund the deposits at all.
Bitcoin vs Gold vs Cash
Going by the various merits the three assets have, Bitcoin stands out as the most worthwhile asset. Its ability to handle cross-border payments makes it a suitable payment currency capable of making transactions within the shortest time possible.
Bitcoin's blockchain technology also boosts the platform's overall functionalities by displaying transactions on the public ledger. However, utilizing blockchain advancement comes with its fair share of challenges as it leaves a track of a user's transaction history.
Revealing that bitcoin transfer information on the blockchain can endanger a trader's security and threaten BTC's fungibility. Luckily, platforms such as Bitcoin Mixer addresses the issue of privacy by offering a bitcoin mixing alternative.
Bitcoin Mixer Solution
Bitcoin Mixer, otherwise known as Bitcoin Tumbler, is a network that mixes your bitcoin and other cryptocurrency transactions. Whether it is sending or purchasing BTC, the mixer ensures all your transactions are untraceable and anonymous.
The platform accomplishes this by mixing an individual's funds and offering some new bitcoins simultaneously. By leveraging Bitcoinmix, malicious entities do not stand a chance of manipulating anyone through tracing personal data and stealing a user's bitcoins in the end.
Conclusion
Bitcoin, gold, and cash are the key drivers to investment strategies in the market. As a general similarity, the three assets make the goal of profit maximization attainable. Nevertheless, with a closer look, each asset has its downsides when a comparison is made.
Cash and gold exist up to date despite being one of the oldest assets in the financial sector. Despite portraying a promising future in the crypto market, Bitcoin's fungibility remains at risk. However, with the cleaning procedure in place, BTC still has loads of potential to become more fungible in the future. By further erasing the transaction history, Bitcoin instills the concept of anonymity in a decentralized ecosystem.
