Gold, bitcoin, Ty Beanie Babies – what do these commodities all have in common? They are all a store of value in some way. Some Ty toys are worth more than half a million dollars in the proper sets. Bitcoin is worth thousands of dollars per coin and has been worth nearly $20,000 per coin. Gold has both industrial and speculative uses.
The question with gold and bitcoin is, which will be the largest store of value in the coming decades.
Brendan Blumer from Block.one is among the many with high expectations for bitcoin, stating:
“Over the next two decades, #Bitcoin will replace #gold as the leading commodity to store value.”
Each commodity has unique values which position them differently to store value.
Bitcoin is an intangible asset, which is easily transferred. BTC can be traded in minutes, experiences volatility, and has a limited total supply. Scarcity and ease of transfer make bitcoin a great store of value. Scarcity limits the utilitarian value of the cryptocurrency.
Institutions have begun vying for control of bitcoin to reap profits for more traditional investors in the wake of crypto speculators sending the price to moon and back. The result of bitcoin as a social experiment is:
Gold has shown an interesting experiment, like bitcoin. To date, there remain hundreds of billions of dollars worth of gold and other precious metals lost at sea. An enormous amount of the world’s gold supply is locked in vaults—in 2017, London alone held more than $200 billion in gold bullion. Humanity has long favored gold for its physical beauty and ease of verification (the age-old “bite” and magnetism tests.)
What is the difference between gold commodities and bitcoin? Both can be traded electronically. Bitcoin, however, is the absolute property of the owner. Holding vouchers for gold doesn’t mean the asset would be yours in case of economic collapse. Sure, you own it on paper, but what stops an institution from vouching that your claim to the assets is invalid for reasons like:
The problem with centralization? You might own something on paper, but it doesn’t really belong to you until it is in your hands. Cryptocurrency solves this problem by being electronic. Even if the internet is turned off, you still own the cryptocurrency. No power? No problem. You can store your private key information on paper (Generally ill-advised, but you could.)
Gold will likely always be worth more than BTC in terms of total value. Due to its presence as a natural resource and the amount of money invested in extracting and refining it from other ores. BTC stands poised to overtake gold as the most functional (read: easy to use, definite ownership, etc.) store of value.