3 Reasons Gold is Better than Bitcoin

- October 17th, 2017

Well-known investment bank Goldman Sachs thinks gold is better than bitcoin, and recently gave three reasons why. Here they are.

Bitcoin, the world’s most popular cryptocurrency, has outperformed gold since the start of the year.
Overall, bitcoin has surged more than 460 percent since January, breaking the $5,300 mark for a new all-time high last week. Meanwhile, the gold price has increased only about 12 percent since the beginning of the year.
As a result, many market participants have been wondering if bitcoin is the new gold. But according to Goldman Sachs (NYSE:GS), gold will remain a relevant asset despite the rise of cryptocurrencies.


Precious metals remain a relevant asset class in modern portfolios, despite their lack of yield,” analysts including Jeffrey Currie and Michael Hinds wrote. “They are neither a historic accident or a relic.”
They believe that gold wins over cryptocurrencies in three out of four categories when assessed using the key characteristics of money. Here’s an overview of those four categories and where Goldman Sachs believes the precious metal wins out.

1. Durability

Goldman Sachs says that while both bitcoin and gold require expertise for correct long-term storage, gold wins because cryptocurrencies are vulnerable to hacking through online wallets or users’ computers or smartphones. Cryptocurrencies are also subject to regulatory risks, and network and infrastructure risks during a crisis.

2. Intrinsic value

There’s a limited supply of gold and other precious metals in the Earth’s crust. Meanwhile, in the case of cryptocurrencies, it’s easy to create alternatives. That means there’s effectively no control over supply at a macroeconomic level, and no intrinsic value due to rarity.

3. Unit of account

Gold is better at holding its purchasing power, and has much lower daily volatility. Bitcoin/dollar volatility has averaged almost seven times that of gold in 2017, the bank said.

4. Portability

While Goldman Sachs sees gold as superior in the three categories above, it acknowledges that bitcoin takes the cake in terms of portability. Transferring bullion can be expensive given its weight, the need for a high level of security and high import taxes in some countries, such as India. In contrast, it’s much faster and cheaper to move bitcoin.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

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2 responses to “3 Reasons Gold is Better than Bitcoin

  1. 1) It’s easier to protect your Bitcoin account than your store room full of gold. A key is surely easier to store than a mass of gold. Hacking is only possible on on-line devices. Cold wallets can’t be hacked. EVER.
    2) You can make your own cryptocurrency tomorrow, nobody will give a damn. So this point is plain wrong. The intrinsic value of Bitcoin is the AGREEMENT BETWEEN PEOPLE that arise from the simple market’s law.
    There will only be 21 million Bitcoins ever, and that’s SCARCITY. Try to make another cryptocurrency and make it reach the level of Bitcoin. You will fail.
    3) It’s true: Bitcoin’s volatility is high now. That’s bad to use it as money but that’s good for trading and investment. Bitcoin is not money: Bitcoin is what the users want it to be. At the moment, not enough people accept it as a form of payment, as simple as that. But that’s going to change.
    When Bitcoin’s market cap will be 1 trillion, volatility will be much lower, and it won’t be anymore as good as a trading asset. It will be much better as money and investment though.

  2. 1) It’s easier to protect your Bitcoin account than your store room full of gold. A key is surely easier to store than a mass of gold. Hacking is only possible on on-line devices. Cold wallets can’t be hacked. EVER.
    2) You can make your own cryptocurrency tomorrow, nobody will give a damn. So this point is plain wrong. The intrinsic value of Bitcoin is the AGREEMENT BETWEEN PEOPLE that arise from the simple market’s law.
    There will only be 21 million Bitcoins ever, and that’s SCARCITY. Try to make another cryptocurrency and make it reach the level of Bitcoin. You will fail.
    3) It’s true: Bitcoin’s volatility is high now. That’s bad to use it as money but that’s good for trading and investment. Bitcoin is not money: Bitcoin is what the users want it to be. At the moment, not enough people accept it as a form of payment, as simple as that. But that’s going to change.
    When Bitcoin’s market cap will be 1 trillion, volatility will be much lower, and it won’t be anymore as good as a trading asset. It will be much better as money and investment though.

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