Interpretation: Why is Bitcoin called “Gold 2.0”?

Since its debut in 2009, BTC has attracted a dynamic core of supporters bullish on its prospect of disrupting gold as a store of value and investment vehicle. The claim that Bitcoin is “digital gold” has been widely circulated among crypto enthusiasts, who have witnessed Bitcoin’s rapid growth and increasing adoption in recent years.

BTC surpasses gold

For centuries, gold has been viewed as a trusted tool, ideal as a store of value. However, the precious metal is facing competition from Bitcoin (BTC), the world’s most valuable and longest-lived cryptoasset.

The invention of Satoshi Nakamoto has achieved higher returns than gold and has quickly become a major choice for those seeking a safe-haven asset. Additionally, the blockchain’s crypto-assets have shown relatively low correlation with traditional financial instruments such as bonds and stocks, which has propelled proponents to compare it to gold.

This article examines Bitcoin’s properties that reinforce the description of “digital gold” and allow people to re-examine its value and prospects.

The Rise of Bitcoin as Digital Gold

Gold has traditionally served a variety of uses, including as a medium of exchange, an inflation hedge, and a store of value. This powerful utility has helped gold join the ranks of the world’s most valuable assets.

Likewise, BTC has skyrocketed over the past decade, constantly breaking milestones and reaching new all-time highs. Due to its continuous rise, BTC has been recognized by a large number of traders, celebrities, banking institutions and even some countries. Additionally, crypto-savvy players and market watchers across the globe have begun to compare crypto-assets to gold. 

Despite being relatively new in the global economy and lacking intrinsic value, cryptoassets have made huge gains and are on track to surpass gold’s market cap by 2030. This unprecedented boom has led some BTC proponents to believe that the crypto asset could replace its main rival as the preferred store of value for years to come. 

For example, Crypto bull and MicroStrategy CEO Michael Saylor has been quoted as saying that “digital gold” will replace physical gold by the end of the century. Anthony Scaramucci, head of SkyBridge Capital, made similar claims, telling CNBC that Bitcoin will multiply and replace gold as an inflation hedge.

At the Bitcoin 2022 conference in April, PayPal co-founder Peter Thiel told his audience that he expects BTC to rise 100 times, outpacing gold and the stock market as a whole. These bullish predictions are not out of the blue, as gold has been underperforming while its digital counterpart BTC has enjoyed an annual return of nearly 230% over the past decade.

What Makes Bitcoin Similar to Gold?

Bitcoin’s exponential growth over the past few years has given participants access to a more valuable asset class than gold or other traditional investment alternatives.

Despite experiencing wild price swings over the past few months, BTC has generally rebounded faster than its rivals. People seeking to avoid hyperinflation are turning to bitcoin as a hedge against market downturns, further cementing the crypto asset’s reputation as “digital gold.”

Here’s what Bitcoin has in common with gold, and why both assets are so popular.

1. Rarity

Bitcoin fits the description of Gold 2.0 because it is a scarce resource, just like its rival precious metal. BTC is designed to have a limited supply of 21 million coins at its ticker level. By 2140, all bitcoins are expected to be mined and circulated.

The inherent scarcity of BTC is a major factor leading proponents to compare it to physical gold. What’s more, crypto assets are arguably rarer than gold, as the supply of this metal remains uncapped.

The rarity factor makes BTC resistant to inflation and allows it to be held outside the traditional financial system. This means that it cannot be devalued by any institution or organization, making it an ideal store of value.

2. Inflation Hedging

BTC is called “digital gold” because of its value and its role as a reliable inflation hedge. Gold has long held the title of the best inflation hedge and has performed well during several recessions.

BTC is relatively young and has only been tested in the current inflationary environment brought on by the Covid-19 pandemic. Still, the cryptoasset is touted as a powerful hedge against inflation due to its unique algorithm and distributed nature.

As JPMorgan researchers explained in a recent research note, institutional players are increasingly opting for BTC over gold as a safe-haven asset amid growing fears of hyperinflation.

3. Benchmark value

Bitcoin and gold are both similar in that they carry a huge reference value, which makes them very sought-after assets. Gold’s value comes from its multiple uses in everything from luxury goods to electronics.

On the other hand, the value of BTC comes from its innovations in the monetary system. The coin’s cryptographic code and distributed system has ushered in a revolution, giving billions of the world’s unbanked access to the global financial system.

in conclusion

Several properties of Bitcoin make it a perfect candidate for Gold 2.0. Similar to its established precious metals rivals, BTC is a store of value that operates independent of traditional banking systems and regions. The cryptoasset has also demonstrated its ability to act as a unit of account and a de facto medium of exchange.

This benchmark cryptoasset is designed at the level of its code to have a limited supply, guaranteeing holders that they will not enter into hyperinflation. Therefore, this invention has the potential to replace gold as the main safe-haven asset.

Bitcoin is still prone to downside volatility compared to gold, but it has ushered in a new era of transaction processing and global payment networks. As the crypto market matures and stabilizes, BTC is seen as a “sparkling star” among new value store tools.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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