Is it possible to do a comparison with the new asset class with a conventional one? This is the question that comes to investors’ minds. Since many people are eager to know about the comparison between Bitcoin with gold, so to know about the various aspects of these 2 popular assets, join us in this article.
Why Bitcoin is called ‘Digital Gold’?
Before we begin with Bitcoin in knowing why is it called digital gold, let us begin with the precious yellow metal. For centuries, gold has been valued by human civilization. In ancient Egypt, this yellow metal found its use in tombs and rituals in temples. In this contemporary era, it is still valued in the jewelry industry.
Due to its rarity, gold has found its importance in the economy of the United States. The Gold Standard is one example here. It was put to an end in 1971 by President Nixon. The value of the USD was set to gold at a specific price. Aristotle, one of the greatest philosophers, once mentioned the 3 main criteria for money. These are a unit of account, medium of exchange, and store of value.
Gold: Finding its best use for jewelry, not money
Today, gold is no more used as money, but mainly for jewelry. Plus this valuable yellow metal is considered a safe haven in the form of gold coins. Other than that, it can also be used in aerospace, electronics, and dentistry. One must not forget that the health of our country is indicated by the gold price. During the time of expansion, the price of gold remains low or steady.
Long ago in 2008 during mid-September, at the time of the financial market crashing down, the gold price had swept down to $740 per ounce, according to a Canadian website that buys and sells precious metals. In 2011, August, the yellow metal made an upswing rise to $1,900 per ounce.
It hardly matters as to which generation you belong to, it cannot be possible not being familiar with gold. This precious yellow metal has always stood in testing times and remains in being a valuable asset. It is not going to disappear so soon.
Bitcoin: The Digital Gold
Now let us come back to Bitcoin. It is the first cryptocurrency known and the one that paved the new wave of decentralized peer-to-peer money structure. It was founded by a pseudonym developer whose identity is still a mystery. Till now, no one has an idea about whether he is an individual or a group. Like fiat money or government-issued currencies, they are subject to be controlled by the central authorities like governments and banks, it is not the same case with cryptocurrency. Bitcoin is free from any authority of banks and governments.
The idea of launching the new decentralized form of money came after observing the effects of centralization in excess. Initially, the creation of a new form of money appeared idealistic, but it has been proved that it can be done, as shown by history. During its early phase, Bitcoin did not have much worth. Slowly the curiosity in this cryptocurrency grew when the latter crypto coin reached parity with the dollar in 2011 on 9th February.
From the year 2011 to 2015 (end), the price of BTC shot to $426 from its early price which was $4.60. From 2015 on April 27 it went upwards to $7,787 from $224. In history, such type of growth has never taken place in the field of finance. No matter whether Bitcoin is successful worldwide, it comes with the disadvantage of being prone to market volatility. And because of this, it falls under the category of high-risk assets.
But that does not have any effect on it, as one cannot deny the fact about its profitability. It has been ten years since the inception of Bitcoin and the circulation of other crypto assets. No matter whether there are now alternatives to it in the form of various altcoins, still, experts are optimistic about its stay.
Now the question arises, about Bitcoin as gold in digital format. Well, it is all because it shares some similar characteristics with the valuable yellow metal. The main similarity to point out between them is having a limited supply. Plus, many consider it a safe haven at the time of inflation or economic Crashdown.
Final words
So this is all about why Bitcoin is called digital gold. Both shares similarity in terms of limited supply. But some people consider it a safe haven at a time of economic slowdown. Bitcoin being the most popular crypto asset is always under the watchful eyes of investors. Well, there is nothing wrong with doing investment in Bitcoin, but one must be careful enough while investing. As mentioned above this cryptocurrency is prone to volatility. So investing in a smaller amount would save you from a bigger loss. Explore Cryptoknowmics website to discover about Bitcoin 2.0.