5 reasons why bitcoin will never fully replace gold as a store of value 💥 (2024)

FAQs

Why can't Bitcoin replace gold? ›

Could Bitcoin Surpass Gold? Regarding market price, Bitcoin has been much higher than gold for some time but is much more volatile. Gold has more use cases, while Bitcoin is limited to financial instruments and services only. Whether Bitcoin will replace gold is a subjective argument.

Because Bitcoin's supply schedule can't be tinkered with, its price has typically been volatile. Compared to gold, which is a physical commodity, Bitcoin is a digital asset. And this means that it is easier to store and transport.

As long as there are governments, there will be demand for that nation's currency. Bitcoin will not replace currency but instead offer people more choices as to which currency they can use to trade and store value and its technology will change how we conduct payments, banking and other financial transactions.

Another strike against Bitcoin as a store of value is that, in short time frames, it is incredibly volatile by comparison to the other stores of value described here. Massive 50%+ drawdowns are not uncommon in Bitcoin while for other stores of value, price swings tend to be much more gradual.

Although Bitcoin and gold have similarities, Bitcoin's decentralization, security, and true finite supply make it the superior asset.

Bitcoin has already surpassed gold within investors' portfolios in volatility-adjusted terms, according to JPMorgan analysts. However, the analysts said it would be unrealistic to expect bitcoin to match gold within investors' portfolios in notional amounts.

The scarcity of gold has long maintained its position as a hedge against inflation. With Bitcoin emerging as another scarce asset, however, it's possible Bitcoin may serve as an additional option to hedge against inflation. This is one of the reasons why Bitcoin has been called digital gold.

All other assets have a potentially unlimited supply, but only Bitcoin is absolutely scarce and perfectly limited.

The advantages of cryptocurrencies include cheaper and faster money transfers and decentralized systems that do not collapse at a single point of failure. The disadvantages of cryptocurrencies include their price volatility, high energy consumption for mining activities, and use in criminal activities.

Is All Bitcoin Worthless Now? Bitcoin hasn't been worthless since it was first introduced—but it is still in its discovery phase. This means investors, consumers, businesses, scientists, and governments are still exploring its uses and value.

Why do some people use bitcoin instead of regular money? ›

A bitcoin has value because it can be exchanged for and used in place of fiat currency, but it maintains a high exchange rate primarily because it is in demand by investors interested in the possibility of returns.

Bitcoin is a risky investment with high volatility, and generally should be considered only if you have a high risk tolerance, are in a strong financial position already and can afford to lose some or all of your investment.

A good store of value should be durable, portable, fungible, divisible, scarce, and verifiable. Bitcoin's digital scarcity and decentralised nature have made it an attractive store of value that is now a top 10 market cap asset. Learn how Bitcoin compares to gold in durability, portability, and other characteristics.

The price volatility, alleged use in criminal activities that may not be easy to map and high energy consumption for mining of the coins are considered some of the key challenges to the acceptance of cryptocurrencies besides these coins not having any sovereign guarantee or approval.

Products, services, wages, and salaries are not valued in bitcoin but in fiat currency. Bitcoin must be converted to a government-backed currency to be used, even in countries where it is recognized as legal tender. The argument here is that because Bitcoin is convertible, it doesn't have any underlying value.

In the last 7 days, the exchange rate has increased by 2.69%. Meanwhile, in the last 24 hours, the rate has changed by 0.68%, which means that the the highest exchange rate of 1 BTC to Gold (Troy Ounce) was 64523.91 XAU and the lowest 24 hour value was 1 BTC for 63857.74 XAU.

Network attacks

During the attack, 388,000 BTG (worth approximately US$18 million) was stolen from several cryptocurrency exchanges. Bitcoin Gold was later delisted from Bittrex, after the team refused to help pay some damages.

The scarcity of gold has long maintained its position as a hedge against inflation. With Bitcoin emerging as another scarce asset, however, it's possible Bitcoin may serve as an additional option to hedge against inflation. This is one of the reasons why Bitcoin has been called digital gold.

Backing a currency is done by the currency's issuer to ensure its value. Bitcoin, gold, and fiat currencies are not backed by any other asset. Bitcoin has value despite no backing because it has properties of sound money.