April 18, 2024

Business Bib

Business & Finance Blog

Cryptocurrencies Might Be All the Rage, But They Will Never Replace Gold

3 min read


Goldman Sachs has come out in support of gold over Bitcoin. This comes as a result of the frenzy that cryptocurrencies like Bitcoin created in recent times. Bitcoin has been called the new gold by some in the market, but investment bankers like Goldman Sachs still believe gold to be the best long term store of value. In a note sent to clients earlier this month, Goldman said ‘precious metals are still the best long term store of value for gold buyers Melbourne.’ The main reason that Bitcoin has been dubbed digital gold, is because like actual gold, there is a finite supply of Bitcoins and their prices seem to fluctuate in response to geopolitical all turmoil.

There are so many reasons why Bitcoin can never be gold.

#1: Cryptocurrencies Are Similar to Fiat Money Than Most People Think

Fiat money is currency that is used as legal tender that is not backed by any physical commodity. Cryptocurrencies aren’t legal tender but they fit the definition of Fiat currency. Some countries are exploring the idea of launching government-backed cryptocurrencies which means that they are just a few steps closer to reaching fiat-currency status. India, Russia and Estonia are considering their own digital currency. Bitcoin cannot be an effective hedge against fiat currencies when it is in itself a kind of fiat money.

#2: Gold Has Always Had an Accessible Liquid Market

Gold has always been an asset that people have been willing to trade for goods or other assets. Gold can be converted to cash on the spot and its value knows no borders. Gold is gold everywhere and you can exchange it for any currency in the world. The same cannot be said of cryptocurrencies. Whilst they are accepted in other places, you cannot trade them everywhere in the world. Gold on the other hand never loses its value and it can be sold anywhere. There are gold buyers virtually everywhere in the world who buy gold in any condition. You can sell your gold jewellery to gold buyers Melbourne or anywhere else in the world and you will get the same spot price in your own currency.

#3: Cryptocurrency’s digital nature makes it vulnerable to security threats

Cryptocurrencies are based on peer-to-peer decentralized system which should keep your money safe, however, it has emerged that the system is not as unhackable as many in the cryptocurrency community would have us believe. Security is a major drawback facing the cryptocurrency community.

Mt. Gox was a Japanese-based high profile bitcoin exchange in the world. At its height, Mt. Gox was handling 70% of the world’s cryptocurrency exchanges. But it had some major security flaws that really set it up for potential risk. In 1994, Mt Gox had $473 million worth of Bitcoins stolen.  The value of Bitcoin came down hard after the Mt. Gox hack and many people did not believe that it would recover. But it did. The second biggest cryptocurrency, Ethereum was attacked via its Decentralized Autonomous Organization  (DAO) on 17th June 2016 when someone siphoned $50 million worth of Ethers. The moral of the story is that whilst Cryptocurrencies were designed for maximum security they have not proven to be unhackable.

Whilst security is a great concern for anyone who has a lot of gold, most people would solve it by taking insurance out on the gold they hold in their premises. It is advisable for anyone to insure their valuables but if it’s old and you don’t have much use for it anymore, you should find gold buyers Melbourne to sell your gold to. It’s almost unheard of that a gold buyer would be robbed, besides, a reputable gold buyer would have full insurance cover and would most likely on-sell your goods within days.

The debate of Bitcoin versus gold has been raging for a while and it might take a few more years for one to come up as a clear winner. The uncertainty with cryptocurrency has made a lot of people uneasy which is good news for gold. And for more information you can read Gold IRA Guide.