There is little doubt where Bitcoin falls currently between being a spendable currency and a store of value. The recent price rise of Bitcoin above $10,000 has once again reiterated that spending the cryptocurrency would be fool-hardy as it would negate potential gains of over 40 percent in just over a month.
With that in mind, Bitcoin has been named as digital gold, as its correlation and movement has similarities to the famous precious metal which is also seen as a safe haven investment. Bitcoin is being likened to a digital gold as it is growing in value, but also because of its negative correlation to traditional markets.
It is yet to be tested as a true safe haven asset, as there has not been any sort of crisis where people can move to Bitcoin to avoid a recession; but, that still may be just on the horizon. Regardless though, Bitcoin has been discussed as being superior to gold as a store of value. This was argued by major US cryptocurrency exchange Coinbase.
A digital age
The main thrust of Coinbase’s argument was that Bitcoin as digital gold, works in a digital age. “Bitcoin is a store of value to rival gold in the digital age,” said Coinbase in a blog post. The post went on to discuss this safe haven narrative that is emerging for the cryptocurrency.
More so, the post delved into what makes gold so expensive and desirable, and the main point is that it is scarce, although exactly how scarce, is up for debate.
“Gold has been a historic store of value primarily because of its scarcity. It’s estimated that you could fit all of the gold ever mined, 190,000 tons, into a box that is only 65-feet wide. If tomorrow, a very hypothetical asteroid the size of that gold box were to crash into the Earth, the value of gold would also crash. While gold is shiny and can be useful in electronics, so are other metals like copper. Yet copper is worth a tiny fraction of the value of gold,” the post explained.
On the other hand, Bitcoin’s supply is well known, and when its supply runs out is even predictable and documented. This gives it an enormous boost when it comes to scarcity. Thus, Bitcoin has the main property of gold which makes it a good store of value and investible hedge, but it also has digital channels.
Bitcoin is a god of the digital age because it can be bought, spent, sent, stored and moved digitally without the person ever having to get their hands on anything physical. Thus, to have the scarcity factors of gold – if not better – and a digital channel, makes Bitcoin superior.