Invest In Gold Or Bitcoin – Which Is The True Store Of Value?

Tuesday, March 12, 2019
By Paul Martin

by GoldCore
ZeroHedge.com
Tue, 03/12/2019

Gold Versus Bitcoin – Which Is The True Store Of Value?

by Adam Strauss via Forbes

As the fiscal position of the United States continues to deteriorate at the same time that foreign countries are scaling back on their purchases of U.S. Treasuries, many investors are rightly worried about where they can hide from a potential decline in the value of the dollar and are looking to invest in a reliable “store of value.”

A store of value is an asset which can be stored and reliably retrieved at a later time with its purchasing power intact. Some investors seeking this protection prefer gold, and some prefer bitcoin. Some even prefer both gold and bitcoin.

Unlike the stock market, bonds, and real estate, gold and bitcoin share several features in common. Neither generates any income. Both are perceived to exist in limited supply. Both are purchased by investors who are worried about depreciating fiat currencies. But as a store of value, gold is much more likely to be the superior option over the next five to ten years for the following reasons:

Properties

Gold is tangible, transportable, and can be purchased or sold anonymously. As a precious metal, gold has unique properties due to its rarity, its durability, its fungibility, its beauty, its resistance to corrosion, its divisibility, and its malleability.

Gold is easy to hide and store in any number of places, and it is a highly liquid asset. While the threat of gold theft certainly is a risk, losing one’s gold is difficult, and losing one’s gold to a hacker is impossible. Unlike gold, bitcoin is not tangible, and, for that reason, it can be sent across the world seamlessly and inexpensively. It can be purchased or sold anonymously through decentralized transactions that require no intermediary.

Like gold, bitcoin is also fungible and divisible. However, it is possible to lose one’s bitcoin by losing the private key of a bitcoin storage address. Bitcoin can also be stolen by hackers, particularly if bitcoin is stored in an exchange. Indeed, epic stories exist where bitcoin holders have lost millions of dollars worth of bitcoin due to ineptitude or hackers or both. Just recently, Gerald Cotten, CEO of QuadrigaCX, died with the passwords of 115,000 investors worth an estimated $140 million in cryptocurrencies.

Limited Supply

Gold’s supply is limited, supporting its role as a store of value. The worldwide supply of gold increases by about 1.5% each year. Gold’s unique properties, mentioned above, make gold a superior store of value compared to other precious metals such as silver, palladium, and platinum.

Gold has emerged as the clear winner store of value after thousands of years of competition against other commodity currencies. A futures market for gold exists, which increases the supply of paper gold, but futures can be settled with physical gold, limiting the extent to which the futures market can influence the physical gold price over the long-term. Bitcoin’s supply increases are also limited, in theory, but bitcoin can be “forked” by dissatisfied bitcoin developers. A fork is a point of divergence in the blockchain, and at its most extreme can lead to a permanent split of one currency into two.

Thus far, bitcoin has begotten multiple children including bitcoin cash and bitcoin gold, and other forks could take place in the future. Besides the possibility of a series of future forks for bitcoin itself, a seemingly endless supply of new cryptocurrencies has been launched in the last couple of years, any one of which could eventually replace bitcoin as investors’ favorite cryptocurrency.

Unlike gold, bitcoin has not endured thousands of years of competition against other cryptocurrencies. Finally, a cash-settled futures market for bitcoin has been launched, which means that a limitless supply of fiat bitcoin can be created by futures market participants.

History and Stability

Gold has been used as a store of value for thousands of years. Since Roman times, the purchasing power of gold has been stable enough that people say an ounce of gold can always be used to purchase a good suit.

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