The battle between Bitcoin and gold and can be seen as the battle between David and Goliath, at least in terms of time. Bitcoin is the most recent currency to hit the world markets while gold is one of the most tried and tested assets in the world; and gold is not only a precious metal, but has also been used as a currency, and has many practical applications as well (it has a high intrinsic value). Some may have already declared the winner already. We are not here to change your mind about your preferred candidate. We are just here to give you a fair comparison between the two.
We will start off by looking at gold. It deserves that courtesy since it arrived well before Bitcoin. Gold has never needed the blessings of central banks or governments to maintain its importance. It has been widely used over the years as a preferred method of investment against inflation. It has given its holders a sense of certainty and security even in the middle of economic crises.
Gold is rare. It does not change its chemical composition or properties over time. It remains as gold and is not affected by changes in weather or climate. It is the perfect hedge for one’s wealth. On the hand, fiat money is dependent on third parties such as banks and governments to give it its value. The value of gold comes from within and no one can take it away. The value is not based on speculation.
Data source: http://onlygold.com
The price of gold has gone up in the last 100 years. The price increase has been mostly due to inflation. Also, it must be noted that gold played a crucial role in the last century. When the US stock market crashed in 1929, gold became the de facto currency and commodity. Investors bought gold because of its stability and ability to appreciate in value. Gold investors in the US did suffer, however, with gold confiscations by the government in the last century.
The gold price made steady gains from 1918 to 1943 through 1968. However, a big jump can be noticed from 1968 to 1993 and from 1993 to 2018. Over the last 100 years, gold has kept value as a backup currency and commodity that people would turn to in times of need.
On the other hand, Bitcoin, which has been famously referred to as “digital gold”, and which is a purely digital asset, is very volatile and has experienced sharp price changes. However, in its short life of fewer than 10 years, Bitcoin has experienced huge increases in value. It was worth close to $0 in 2009 but it is currently worth over $10,000 (having reached $20,000 on some exchanges in the latter part of 2017). Unlike gold which is backed by unique chemical and physical properties, Bitcoin is backed simply by technology, its utility for payments, and the backing of the community.
Bitcoin had already shown promise when its value rose to more than $1,200 on the 29th of November, 2013, despite the price momentarily declining afterwards. A special thing about Bitcoin is that it has recovered from multiple sharp drops that had people wondering if it would ever recover. Despite these drops, the new cryptocurrency would go on to make spectacular and unpredictable comebacks.
Some people have claimed that Bitcoin is a currency with no value, and which only thrives on speculation. Others share different views however. Peter Thiel, for example, is on record for saying: “It’s like gold, and it’s just a store of value.”
2014 – 2017: Bitcoin vs. Gold
We will compare how Bitcoin and gold have fared over the years. Our aim is to find the more sustainable currency or commodity for the future.
Bitcoin price chart for 2014Data source: coinmarketcap.com
There is no doubt from the graph that Bitcoin was swimming in dangerous waters. It started the year on a high but soon lost its momentum. The price declined sharply from just over $800 at the beginning of the year to slightly over $300 by the end of the year. It tried to make some comebacks but they were met with a lot of resistance. Bitcoin struggled to make it past the $500 mark for the most part of the year.
While Bitcoin was in a free fall, gold had a mixed year. Its price grew steadily for the first half of the year before they suddenly started to decrease. The price then continued to decrease until the end of the year. The drop was necessitated mainly by the strengthening of the American economy and currency. Other factors included stability between Ukraine and the Middle East. This stability reduced the demand for gold as there was no crisis in place.
Gold prices in 2014
Data source: http://www.usagold.com
Bitcoin started the year selling at over $283 and ended it selling at over $300. This was a welcome development for investors and enthusiasts who had seen the currency decline by over 50% the previous year. The price of Bitcoin was as volatile during the 2015 year as it was in the previous year. It took a number of nosedives, some of which were attributed to the bad publicity of Bitifinex. It also recorded some high trading volumes suspiciously triggered by the infamous MMM Ponzi scheme. Bitcoin ended the year on a high and left investors upbeat about the future.
Gold was on a decline throughout the year. Gold was priced at $1,188.47 per ounce at the beginning of the year, but declined to $1,060.8 per ounce by the end of the year. This was again largely due to the influence of the American dollar that was gaining against other major currencies.
2016 – 2017
Bitcoin’s value was around $266 per BTC in the first week of January, 2016. The cryptocurrency had a good year as it finished off with a value close to $1,000 per BTC. The value of Bitcoin had surpassed $1,000 by early January 2017. This year turned out to be a watershed year in Bitcoin’s history. Bitcoin managed to reach an all-time high of over $19,000 by December of 2017. The price did drop significantly the following day, however. Despite the drop, BTC had already set a significant tone in its price. The year finished off with Bitcoin selling in the region of around $15,000 per BTC. This was indeed a profitable year for many investors.
Gold performed very well between January 2016 and December 2017. The gold price went up in early 2016 due to high demand from the Asian nations. However, the surprise increase came towards the end of the year, when Donald Trump was shockingly (to some) elected as the president of the United States, despite heavy opposition and lies by the press. This development and the panic caused by leftist media caused the stocks to temporarily fall, however, the stock market later hit record level highs.
One of the major stories of 2017 was the increasing political tensions between the United States and North Korea. This caused a lot of uncertainty. This situation can only favor the price increase of gold and this is exactly what happened. Gold was selling at $1,188.46 at the start of the year and the year ended when it was selling for $1,302.90. This may also be attributable to the political left’s constant attacks against the current US President, which is much unlike anything most of us have seen in our lifetimes.
Enjoy The Best Of Both Worlds
The future of gold and “digital gold” (Bitcoin) looks bright. The two assets performed very well from 2014 to 2017 and this trend is expected to continue. Bitcoin has had some troubling times, however, due to last month’s crackdown on cryptocurrency exchange platforms.
DinarDiham’s gold price-backed cryptocurrency is a new innovative token that gives you the opportunity to enjoy the benefits of both the price stability and hedging aspects of gold, and the speed and flexibility of cryptocurrency. This is one of those few moments in life when your bread can be buttered on both sides.