Bitcoin value versus gold is hot debate online. As more and more investors are switching to Bitcoin, still too many times people take the correlation out of context. Some people argue there’s $8 trillion worth of gold in the world and $1 trillion in Bitcoin, thus gold is more valuable.
But this is not the metric to consider. When asking whether X is more or less valuable than Y, we need a unit that compares the relative value. That unit of account is the USD.
One Bitcoin value at $30,000, needs to be matched by approx 16.6 ounces of gold ($1,800 /oz.). By “unit of account” Bitcoin is by far more valuable than gold.
Another argument describes gold as a “tangible asset” while Bitcoin is not. I reality Bitcoin is more tangible than gold. There is a lot more to comparing the value of these two mediums than just simple stockpile metrics or unit of account as those above.
Bitcoin and gold have many similarities, but there are also important differences. After you read this you’ll probably agree that Bitcoin is far more valuable than gold not only as a physical asset but also in terms hardness, finite supply, difficulty of production, usability and scalability. This is why in many financially educated investments circles Bitcoin is preferred over gold.
Side-By-Side Comparison of Bitcoin vs. Gold.
A research funded by the Natural Environment Research Council (NERC), the Science and Technology Facilities Council (STFC) and the Deutsche Forschungsgemeinschaft (DFG) reveals that gold came to earth millions of years ago through meteorites that impacted on earth.
But just like the universe turned certain minerals and chemical reactions into gold, electricity turns power into Bitcoin. They are both created by tangible sources and they are both very expensive to create. Bitcoin is actually the most expensive to create than any other monetary medium on earth.
According to economic professor Saifedean Ammous of Columbia University, money harness (how hard it’s to produce), cost of production, limited supply, unmanipulated creation, and “salability” across time and space is what constitute “sound money.” Sound money has always appreciated in value and created the most stable economies over the centuries.
Bitcoin is a computer code. Perceptually, to the eye of the uneducated, has no value other than supply and demand. This could not not further from the truth. Demand is related to value. The value of money is related to characteristics that comply with rules of sound money.
| Gold | Bitcoin |
| Physically mined. | Electronically mined. |
| Cost $1,200 to produce 1 Oz of gold. | Costs between $7,000-$11,000 USD to mine one bitcoin. |
| Limited production: Gold mining produced 2.5% of global stockpile every year. This production will continue. | Finite production: there will be only 21 million bitcoin mined, nearly 19 million are mined already. The rest will finish mining by 2140 and production will stop. |
| A variable 30,825,515 ounces of gold are produced daily. | A fixed 6.2 Bitcoin are released for every new transaction block verified. Currently it’s estimated that 900 new bitcoins are mined per day. |
| Decentralized: Has no central ownership, it’s not produced by any government. Clearance does not require a third party custodian. | Decentralized: Has no central ownership, it’s not produced by any government. Clearance does not require a third party custodian. |
| Gold is not easy to transport, cumbersome for central banks to use it for settlements and subject to security problems. | Bitcoin is a global 24/7 peer-to-peer, highly secure, cash transaction platform. Takes 10 minutes to clear a Bitcoin transaction through a sophisticated consensus system without a point of failure. |
| Not used as a currency but owned as an asset class. | Can be used as a currency, but primarily hoarded as an asset class. With a transaction time of ten minutes it’s difficult to use Bitcoin as a currency other than for specialized transactions and settlements. It it said that developing countries with billions of unbanked individuals may adopt bitcoin as currency. |
| Gold is untraceable depending where purchased, and difficult for governments to confiscate. | Bitcoin is anonymous and impossible to confiscate. As long as held in the Bitcoin blockchain, no one can identify ownership. If it’s held on regulated exchanges or wallets that require a KYC identification then ownership becomes traceable. |
| Gold value grew 105% in the last 11 years. | Bitcoin value grew as high as 68,000% in the last 11 years |
Fidelity backs a study by economic Professor Saifedean Ammous that Bitcoin value will rise to $1 million because of its hardness and sound money characteristics.
Bitcoin value is better than gold because it meets all the characteristics of sound money that’s salable over space and time. Like gold, Bitcoin represent property ownership, security, and freedom. Maybe not good enough to buy your espresso macchiato, but a hard currency and an asset incredibly valuable today and possibly centuries to come.
Riccardo Ferrari
RiccardoFerrari.com
