Maybe the clearest difference between Bitcoin and Gold is this: Bitcoin is digital, whereas Gold is a tangle physical asset. However, the distinctions between these two assets are much deeper. These days, Bitcoin is accepted as a form of payment by APMEX.
The precious metal gold has been used for millennium by humans as a medium of exchange. It is useful in manufacturing and technology as well and is admired for its beauty in keepsake, art, and jewelry form. It is widely regarded that physical gold is a solid long-term investment as well as a hedge that can effectively protect against market volatility.
On the other hand, Bitcoin is a crowdsourced, coded currency that first came into existence in 2009.
Bitcoin is the first decentralized digital currency in the world. This innovative virtual money system was first proposed in 2008 by Satoshi Nakamoto, who was a software developer. In 2009 the public was given access to it. The system enables bitcoin community members to use open-source software to mine new bitcoins through solving complex mathematical equations. There is a cap of 21 million for the total supply that can ever be mined. Bitcoins are represented by the records of their transactions made between different addresses. An addressed is comprised of sequences of numbers and letters that are randomly generated. Users buy bitcoin through using another sequence via a private and secret key. All bitcoin transactions must be verified by miners.
Bitcoin Currency Benefits And Risks
Bitcoins provide a unique trading experience for users. Unlike the British pound and American dollar, bitcoin, which is also called cryptocurrency, isn’t regulated by one central bank. That means, theoretically, that virtual currency is decentralized and may be accepted anyplace in the world. However, it also means bitcoins are unregulated, and that can leave the door open for corruption to occur.
In recent years, the bitcoin market has been disrupted by power struggles between traders and key creators. Since the end of 2015, over 50 percent of the creation of bitcoin currency has been controlled by Chinese bitcoin miners, which has slow down transaction speed significantly for non-Chinese users, according to the Washington Post.
There is no personal identifying information carried with Bitcoins like physical addresses or names. The potential for being able to make anonymous transactions with the currency is especially attractive out on the black market. Only bitcoin payments were accepted by Silk Road, which was a website that formerly sold millions of dollars worth of illicit goods and illegal drugs. The FBI shut the website down in 2014, and the creator of the site was prosecuted, according to the New York Times.
Since bitcoin is crowded source, the value of the currency relies on community participation. During the early years, there was a very enthusiastic base of investors and developers that bitcoin benefitted from. Since that time its popularity has faded. A prominent bitcoin developer named Mike Hearn said in early 2016 that the currency was a failure and he announced that he had sold off all of his own bitcoins.
Hearn said that the reason it had failed was that its community had failed. It had been intended to be a decentralized and new form of money lacking in systemically important institutions that were too big to fail, but it had become something that was even worse, which was a system that was controlled completely by only a few people.
Investing In Tangible Gold Vs Investing In Bitcoin
Like with physical gold or any commodity, Bitcoin is prone to drastic price fluctuations. From 2009 through most of 2013, the price of bitcoin gradually rose from zero to close to $200. In November 2013, there was a sharp increase in bitcoin value up to $1,242, which almost surpassed the price of gold, which at the time was trading about $1,250 per ounce, as reported by CNN Money. During this spike in bitcoin price, there were dozens of websites that launched in order to facilitate investing in bitcoin. Bitcoin investing also got a lot of attention paid to it in the media at this time.
Investing In Cryptocurrencies
With more users choosing to invest in bitcoin, it has resulted in miners working to increase the world’s supply and higher transaction fees being imposed by developers. Bitcoin was unable to maintain its peak price. From the end of 2013 through the start of 2014 the value of bitcoin steadily declined to under $400.
Hearn said that it had never been guaranteed that investing in bitcoin would yield returns. He said that bitcoin had never been intended to be a form of investment and had been advertised fairly accurately to be an experimental currency that you should never purchase more of than you could afford to lose.
Supply And Demand
From 2011 to 2013, market pressures drove the price of Gold to its historic highs. In September 2011 the price of gold exceeded $1,900 an ounce. In to 2016, it stayed over $1,000 an ounce. Although gold does respond to supply and demand, its fluctuations are not as extreme as many other types of investment commodities, which includes Bitcoin.
Historical Gold Value
Another thing that is important to note about Gold is that is has demonstrated reliability. Gold has been traded by civilizations since about 600 B.C. and investors and dealers still continue to enthusiastically use it today. It can also be traded via stocks and other means – check out the best gold stocks here. Gold will also never lose its intrinsic value due to it being a Precious Metal that has many different practical applications.