The cryptomania has also been compared to the Tulip mania of the 17th century
In a recent interview, billionaire Ray Dalio said Bitcoin, the world’s largest and oldest cryptocurrency, is like “digital gold”. His skepticism about cryptocurrencies is well known, but Dalio has admitted that he owns an undisclosed amount of Bitcoin – just to diversify his portfolio. The Bridgewater Associates founder goes on to say that if someone put an a on their head and said they could only have one, “I would choose gold.” While Dalio is clear about what he would pick, several others continue to look critically at cryptocurrencies, including Bitcoin. This is despite the fact that the digital currency market has experienced an unprecedented boom in the past year.
And so the question arises whether Bitcoin is really digital gold or just a passing fantasy?
Fair comparison?
The first thing that comes to mind is whether it’s really a fair comparison. Gold has been around for thousands of years and people have been relying on it for just as long. And while it may not be used as a medium of exchange – money – but it has tremendous value and is considered a trusted tool when it comes to parking your money, even as an investment if not jewelry. Not to mention that there is hardly anyone on the planet who does not know what gold is. Does Bitcoin evoke the same trust? The answer is “no”, despite the boom that the digital currency has seen in the past year.
Volatility Factor
The other advantage that gold seems to have over Bitcoin is the volatility factor. Let’s understand this with an example. Today (Aug. 12), Bitcoin opened at about Rs 33.99 lakh, 0.70 percent higher than its last close. The same digital currency was valued at $64,000 (about Rs. 48 lakh) in April. Gold, on the other hand, was valued at Rs 44,790 per 10 grams in April. Today (August 12) the value is Rs 47,705 per 10 grams. Gold gives you that security, which Bitcoin does not do for the time being.
Stand the test of time
If there’s one asset that has stood the test of time, it’s gold. Bitcoin was launched in 2008 and has grown significantly since then. In fact, it has grown 45,644 times to this day since it was valued at $1 on February 9, 2011. However, let’s not forget that the crypto mania has also been compared to the Tulip mania of the 17th century when Dutch investors invested huge funds to buy tulips to drive up their prices, only to burst the bubble quickly. Gold remains an asset that is certainly not going away anytime soon. The jury is still out on Bitcoin, despite many saying that cryptocurrency will one day replace traditional money.
It’s all about trust
While volatility can be a hallmark of Bitcoin, for now there are areas where the largest crypto token aligns with gold – the store of value and as a medium of exchange. In addition, both are highly liquid and can be converted to fiat currency whenever a person wishes. But there is no denying that gold remains the preferred choice for many because of the confidence they have in this traditional asset.
