It was a great time to own Bitcoin (CRYPTO: BTC). Since the start of 2023, the top digital asset is up 307%. The adoption of spot exchange-traded funds (ETFs), as well as the Halving in Aprilwere recent catalysts.
Investors may be surprised to know that gold is too near record highs thanks to the bullish sentiment. Bitcoin and this precious metal are often compared. But the leading cryptocurrency is a better asset to own.
How Bitcoin and Gold Are Similar
Market participants like to compare Bitcoin to gold. Therefore, it may be worthwhile to first understand some similarities between the two.
Scarcity is something that investors should take into account. A hard supply cap of 21 million coins is etched into Bitcoin’s software. And the earth’s crust contains a certain amount of gold.
The prices of assets with a fixed supply should theoretically rise as demand also grows. This basic economic principle helps explain why gold has been considered a popular store of value for long periods of time.
Moreover, there is also some use here. Gold is mainly used in jewelry, but is also present in certain industrial settings. Likewise, Bitcoin’s value comes from being a completely decentralized network with no single entity in charge, reducing transaction costs while sending money to anyone around the world.
Bitcoin’s lead
At a high level, it’s easy to see how Bitcoin and gold are both scarce. Moreover, they are both useful in different situations. But if we dig deeper, we will easily see how the best crypto is a superior investment.
Let’s get back to the topic of scarcity. Investors might think that gold has a fixed supply ceiling, but this couldn’t be further from the truth. According to the US Geological Survey, 77% of all gold in the Earth’s crust has been mined. So a significant amount of gold still needs to be mined.
If, for whatever reason, demand for gold were to increase in a short period of time, mining companies would be incentivized to invest aggressively to expand their operations and target areas around the world that may be difficult to reach. In other words, gold’s supply schedule could be changed based on demand trends.
This is where Bitcoin stands out. It is absolutely finite. It is highly unlikely that the aforementioned 21 million coin supply limit will change unless Bitcoin stakeholders want to completely undermine the value proposition of the entire network. Because Bitcoin’s supply schedule cannot be tinkered with, its price has tended to be volatile.
Compared to gold, which is a physical commodity, Bitcoin is a digital asset. And this means it is easier to store and transport. Bitcoin can also be divided into much smaller units while also being acceptable in certain transactions. Try going to a restaurant and cutting off a piece of gold to pay the bill.
Investors should also not ignore the store of value debate, which is probably the most looked at aspect when comparing Bitcoin and gold. Here Bitcoin shines brighter than the precious metal.
Ultimately, saving and investing is about increasing purchasing power over time. In the past five years, the price of Bitcoin has skyrocketed by 718%. This means that a $1,000 investment in June 2019 would be worth almost $8,200 today.
In contrast, the price of an ounce of gold has only increased by 73% over the same period. And this trajectory has included major disruptive developments, such as the pandemic, inflationary pressures, higher interest rates and general economic uncertainty.
Going forward, Bitcoin and gold will likely continue to draw comparisons. But I think the leading cryptocurrency looks to be the better investment opportunity over the next five or ten years.
Should you invest $1,000 in Bitcoin now?
Consider the following before buying shares of Bitcoin:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Bitcoin wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $808,105!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns June 10, 2024
Neil Patel and his clients have no positions in the stocks mentioned. The Motley Fool holds and recommends positions in Bitcoin. The Motley Fool has a disclosure policy.
Here’s Why Bitcoin Is a Better Investment Opportunity Than Gold, originally published by The Motley Fool
