(Disclosure: Author holds an investment in bitcoin.)
There have been a lot of analogies over the years to bitcoin being a sort of “digital gold.” But how does bitcoin actually compare to gold as a storage unit of value? Can it protect against the risk of inflation the way gold does? Let’s compare bitcoin and gold and see how they stack up as wealth preservation tools.
Trust In Bitcoin Vs. Gold
An asset cannot be used as a way to store wealth if the majority of people don’t agree it is valuable and believe it will remain valuable in the future. This is one area where gold has a clear advantage. Whether it takes the form of coins, jewelry, art or something else, someone in 2019 B.C. would be just as likely to agree that gold is valuable as someone in A.D. 2019.
Bitcoin, because it is so new, doesn’t have this advantage. It’s only been around a decade. It’s going to take more time for bitcoin to prove itself as a long-term tool for storing wealth.
Here is one area where bitcoin is the clear winner. Bitcoin is a nonphysical asset, and can be sent and received from anywhere with an internet connection. It also operates entirely outside the banking system, so it is easy and fast to send and receive payments across borders.
Gold must be physically stored somewhere, whether in a personal safe or with a company in its vaults. If you don’t hold the gold yourself, you can’t access it at will, and if you do, it doesn’t necessarily mean you can move it around easily. Try bringing several pounds of gold onto an airplane without attracting attention and suspicion at the airport.
Furthermore, some governments throughout history have attempted to ban or confiscate privately owned gold (it was actually illegal for private citizens to own and hold gold for 41 years in the United States).
It is much less likely a government could successfully block access to bitcoin, as doing so would require blocking access...