Nothing Can Replace Gold, Not Even Bitcoin!

Nothing Can Replace Gold
Published on: January 15, 2024

Last week, the US Securities and Exchange Commission (SEC) finally approved the Bitcoin Exchange-Traded Fund (ETF), causing a resurgence in the price of Bitcoin and the entire cryptocurrency market. With the soaring price of Bitcoin, the concept of “digital gold” has been brought up once again. However, it must be emphatically stated that the notion of Bitcoin as “digital gold” is dangerous and misleading.

It must be acknowledged that Bitcoin still has the potential to become an honest form of currency, putting an end to the severe abuse of fiat currency systems by central bankers and politicians. There are many reasons to hold Bitcoin, but none of these reasons are related to holding physical gold.

Bitcoin cannot replace gold for the following reasons:

Firstly, comparing Bitcoin to gold is unfounded. Bitcoin is neither a reliable store of value nor a safe-haven asset. The reasons for its existence are yet to be validated, and eternity is out of the question. Therefore, the most accurate understanding of Bitcoin should be as a promising technology. If this cryptocurrency gains widespread adoption, it may help to solve some significant problems facing the global monetary system. However, this vision has not yet become a reality, and whether it can be achieved in the future is unknown.

Furthermore, the reason Bitcoin is so popular is entirely due to the fact that it is still the most popular, useful, and secure cryptocurrency to date. Bitcoin has the first-mover advantage, with network effects being more pronounced, and it has higher brand recognition. In comparison, many other cryptocurrencies have either failed or are purely fraudulent. However, these advantages could be lost at any time, a phenomenon not uncommon in the technology sector. Think about the former social media pioneer MySpace, which also had these advantages, but when new competitors emerged, it was left stranded.

The wealth of Bitcoin is inseparable from the continuous improvement and updating of the protocol by the voluntary developer community behind it. What will be the future direction of development? This requires judgment, but as long as it involves humans, errors will be made.

The decision regarding the Lightning Network is a good example of this.

A few years ago, it was evident that speed restrictions and cost issues during periods of high Bitcoin trading volumes were very apparent, and there was internal disagreement within the community about how to increase Bitcoin’s capacity to process more transactions per second. In the end, the majority decided to abandon the expansion proposal for the Bitcoin blockchain and instead adopt the Lightning Network. However, the decentralized nature or security of this second-layer payment protocol is far inferior to the Bitcoin network itself.

Bitcoin is an innovative technology that has the potential to disrupt the world, but it also has the potential to become worthless. If investors want to buy Bitcoin, it should be because they understand the project and believe it will succeed, not because of the so-called “digital gold.”

In contrast, gold is a completely different type of asset. It is not a technology, and its value does not depend on innovation, electricity, or internet connectivity, nor does it have developers working behind it. Physical gold is scarce, durable, and aesthetically pleasing, which gives it its value. It is precisely because of these characteristics that gold has retained its value as a safe-haven asset and a store of value for thousands of years.

In summary, gold is irreplaceable.

Bitcoin Cryptocurrency Gold Precious Metals