Extract from the unreleased book ‘Bitcoin Simplified’

By Naseeff Ramzi

The bubble, typically, is a short or extended period depending on the market. And many often link bitcoin to gold – since many look at it as one of the safest investments. Sometimes even during stages of stress. However, gold is dug from the ground and forged in flames, but Bitcoin is created by computers solving complex equations. Although they are entirely different, they share some common ground. 

But Gold and Bitcoin have limited supplies – and the only way they appeal to investors is by mining them to increase value. As the market becomes familiar with crypto, we can see that both gold and cryptocurrencies are not going away anytime soon. One of the reasons for Bitcoin seems to be to share many gold rare properties, and it permits people to connect on the internet anywhere in the world. It uses cryptography which is computer science and mathematics to protect electronic communication to make sure your coins cannot be copied or forged. 

Unlike gold and cash, you can receive Bitcoin in seconds to minutes. Gold is similar to Bitcoin in the terms that no politician can create more into existence. Gold lasts forever and is difficult to counterfeit. The Bitcoin market cap is over $154 billion (£120 billion) at this moment as the Bitcoin price is around $31,276 (£23,5000) as we recently hit an ALH (All-Time-High). Many believe that Bitcoins market cap will become hundreds of trillions. 

The daily volume for Bitcoin is around $8 billion (£6.2 billion) in tracked exchanges. The gold market at this moment is at $7 trillion (£6 trillion), and the daily volume is around $109 billion (£85 billion) to $231 billion (£180 billion) a day. Bitcoin is capped at 21 million and gets harder to mine over time. As for how much mining has taken place? It is about 80% of all Bitcoin as of today. Whereas with gold, approximately 165,000 tones exist above ground today, and approximately 4,500 tonnes get mined a year.

A digital wallet hosted by an online service can store Bitcoin, but if the passwords are lost, you cannot recover the bitcoin. Most gold investors store gold in secure vaults. However, theft will always be a concern.

It’s a vast comparison seeing how Gold has been around for more than 2,000 years, and Bitcoin has only been around since January 2009. But they are both known as safe-haven assets. And while many identify Gold this way for a long time now, for Bitcoin, it’s only been over a decade ago.

This chart compares the price of gold and Bitcoin before Bitcoin hit its peak in December 2017 where it reached its all-time high. As we can see, the cost of gold slowly increases throughout the year, making it a safe asset to invest in. However, this does not compare anywhere near to how much Bitcoin rises, making it a more significant investment. Furthermore, the price increased to $20,000 (£15,800) at the end of 2017, and gold increased by around 2% by the end of 2017. At the same time, Bitcoin rose to over 1900% in the year 2017 alone. Many have called Bitcoin the digital gold as Bitcoin is like an easy gold, seeing how the bank or government don’t issue either of them. It is challenging to compare Bitcoin and gold, as the latter has dominated the safe heave asset, and the former was only introduced a decade ago and only has gained widespread recognition in the last few years. When comparing gold to Bitcoin, they both share traits which make it hard to steal, forge as Bitcoin and encrypt and decentralised with complicated algorithms. 

Fake gold is hard to sell because jewellers can test gold, but both Bitcoin and gold are hard to forge. However, Bitcoin halving that happens every four years can make Bitcoin scarcer than gold, as all Bitcoin will be in circulation before 2140. Billions of people around the world lack access to banking infrastructure. 

Bitcoin came in place to tackle these issues by sending value across the globe with near enough no fees. Both Bitcoin and gold have very liquidated markets which many can trade with fiat money. Gold is more of a safe asset to invest in as Bitcoins price can be highly volatile as seen when Bitcoins price went from less than $1,286 (£1000) to over $19,302 (£15,000) in just one year and Bitcoins price dropped back than in 2018 to around $6,430(£5,000) and slowly started to rise. 

And many view Bitcoin as gold 2.0 since they share very similar properties, they are both non-government issues and have limited supply. If you’re curious about the similarities and differences between gold, fiat, and bitcoin – then refer to the chart below.