Bitcoin Is Fundamentally Better Than Gold As Both a Currency and a Financial Safe Haven

January 15, 2020 / by Crypto.IQ

For perhaps the entire history of human civilization gold has been used as a form of currency, and in more recent times gold is considered one of the top financial safe-haven assets during times of economic crisis. As this article will explain, however, Bitcoin (BTC) is fundamentally better than gold as both a currency and as a financial safe haven.

Currently gold is quite valuable, with a price of $1,550 per ounce, and the price of gold is relatively stable, fluctuating between $1,260 and $1,610 over the past year. However, fundamentally gold is hard to use as a currency, since it is physical and cannot be sent digitally, and also it is not that easy to trade gold for fiat or goods and services.

For example, let’s say someone has an ounce of gold and wants to pay their rent for the month and buy food. It is highly unlikely that the landlord will accept gold, and practically impossible that any grocery store or retail store, in general, would accept gold. Therefore, the only option would be to sell the gold.

Selling gold is not that straightforward, however. The only options are cash to gold stores and pawn shops. Both places act as if the price of gold is highly negotiable, and their business is to make money by paying gold sellers less than the gold is actually worth.

If someone is lucky, they could find a place to sell gold for cash and get the exact spot price after tedious negotiation. During this negotiation, the gold buyer will scratch the gold, put a magnet to the gold, and even drop some chemicals on it to test purity, while trying to convince the seller that it is not worth its spot value.

So someone selling gold would have to spend money and time driving to a gold buyer and could easily get less money than the gold is worth, not to mention the stress of negotiating with the gold buyer.

Besides which, nowadays, money often has to be sent over long distances, such as when buying goods or services on the internet, or when trying to send money to friends and family in other states or countries.

Sending physical gold long distances takes days, and there is a risk that the gold could be stolen in shipmen, so gold is ineffective and insecure for long-distance payments. Then, once the gold reaches its destination, the person who receives the gold has to deal with the hassle of cashing it out.

This problem is magnified for people who are trying to send large amounts of money with gold. Perhaps an entire security team would be needed to ship a large amount of gold, and it would be highly costly while still taking days to reach its destination. If gold is going over an international border there is always the risk it could be seized as well.

Compare this to Bitcoin (BTC), which can be sent anywhere in the world instantly and securely. Bitcoin (BTC) can reach any destination in the world in seconds, even if it’s millions or billions of dollars.

Further, Bitcoin (BTC) can easily be sold for near its spot value at any Bitcoin ATM or crypto exchange, minus a small fee that can range from 2% to 10%, which is worth it for convenience. Also, there are plenty of individuals and merchants who accept Bitcoin (BTC) as a currency, so there are numerous ways to buy goods and services with Bitcoin (BTC) without cashing it out.

Clearly Bitcoin (BTC) is a superior form of money when compared to gold, and for similar reasons, Bitcoin (BTC) is a superior financial safe haven.

For example, if an investor was worried about the economy and decided to sell some stocks in order to buy gold, it would be a costly and time consuming process to actually receive that physical gold, since it would have to be shipped. This limits the investor’s options to move back and forth between physical gold and stocks as market conditions fluctuate.

Instead, investors usually choose to receive paper gold, which is literally a certificate saying that they own gold that is stored in a vault somewhere. Although it is difficult to estimate, it seems that there are hundreds of times more paper gold than the gold backing it in vaults. This effectively means that someone who buys paper gold does not really own any physical gold.

Compare this to Bitcoin (BTC), which can instantly and securely be transferred to an investor, even if it’s millions or billions of dollars. Further, that investor could easily sell the Bitcoin (BTC) for other assets as market conditions change. In other words, Bitcoin (BTC) is a highly liquid asset, while gold is relatively illiquid. 

Thus, the fundamental characteristics of Bitcoin (BTC) makes it a better currency and safe haven asset than gold. Considering that the gold market cap is somewhere in the many trillions of dollars, and the Bitcoin (BTC) market cap is around $0.15 trillion, it is clear that Bitcoin (BTC) has plenty of room to grow in the coming years due to its fundamental advantages over gold.