Is Bitcoin an alternative to gold?

2023-04-17 by

Hugues Marty

Gold is dead money. Bitcoin is life insurance.

Michael Saylor, CEO of MicroStrategy

As the global economy continues to grapple with inflationary pressures and uncertainty, investors are searching for safe-haven assets to protect their wealth. In this context, the debate about whether Bitcoin is a viable alternative to gold has become increasingly relevant. With central banks around the world flooding the market with cash to support pandemic-hit economies, many are turning to Bitcoin as a hedge against inflation. With the increasing adoption of Bitcoin by institutional investors, the debate whether Bitcoin is a substitute for gold has intensified.

One of the biggest advantages of Bitcoin over gold is its scarcity. While the supply of gold is limited, it is difficult to ascertain the exact amount of gold in existence. On the other hand, Bitcoin has a limited supply of 21 million, with roughly 18.5 million already in circulation. This limited supply has led some experts to believe that Bitcoin could potentially surpass gold in value.

According to a report by JPMorgan Chase & Co., “the adoption of bitcoin by institutional investors has only begun, while for gold its adoption by institutional investors is very advanced.” The report also stated that “even a modest crowding out of gold as an ‘alternative’ currency over the longer term would imply doubling or tripling of the bitcoin price from here.

Michael Saylor, CEO of MicroStrategy, a publicly traded company that has invested billions of dollars in Bitcoin, has been vocal about his belief that Bitcoin is a better store of value than gold. In a tweet, he said:

Gold is dead money. Bitcoin is life insurance.

However, not everyone in the finance industry is convinced that Bitcoin is a substitute for gold. Peter Schiff, CEO of Euro Pacific Capital, has been a vocal critic of Bitcoin, stating that it has no intrinsic value and that its price is solely driven by speculation. He also believes that Bitcoin’s limited supply is not an advantage, but a disadvantage, as it could lead to a deflationary spiral.

In an interview with Kitco News, Schiff said:

I think it’s foolish to believe that Bitcoin is going to replace gold. Gold has been money for thousands of years, Bitcoin has been money for ten years. Gold has a track record of preserving value, Bitcoin does not.

Despite the differing opinions, the fact remains that Bitcoin has seen a significant increase in adoption by institutional investors in recent years. Companies such as Tesla, Square, and MicroStrategy have all invested billions of dollars in Bitcoin, signaling a growing acceptance of the digital currency as a store of value.

In a recent interview with CNBC, Rick Rieder, BlackRock’s CIO of Fixed Income, stated that Bitcoin has the potential to take some market share away from gold. He said:

I think that digital currency and the receptivity, particularly millennials’ receptivity of technology and cryptocurrency is real. Digital payment systems are real, so I think Bitcoin will take some of the market share of gold.

In conclusion, while the debate over whether Bitcoin is a substitute for gold is ongoing, it is clear that the digital currency is gaining acceptance as a store of value. The limited supply of Bitcoin, combined with its growing adoption by institutional investors, has led some experts to believe that it could potentially surpass gold in value. However, it remains to be seen whether Bitcoin can truly replace gold as the ultimate safe-haven asset.

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