Bitcoin vs Gold

Bitcoin vs Gold
Bitcoin and gold are both widely regarded as having value, but in what sense, and how can the two be compared? This is an important question which goes back to the fundamentals of money and the development of assets which can be traded or used to purchase goods or store value.

Money may be defined as a means of exchange—an intermediary between the buyer and seller which has a determined value. This usually takes the form of bank notes or coins and, increasingly, digital money. But this has not always been the case. For thousands of years, precious metals, such as gold, were regarded as having monetary value and were widely used as money.

Bitcoin
Bitcoin, which only appeared on the market in 2009, is a newcomer and is rapidly filling the place that was once occupied by precious metals. In fact, Bitcoin, which reached an all-time high of nearly $20,000 USD in December 2017 (at the same time, gold was at about $1,260 USD per ounce), is now regarded by many as the new ‘digital gold’, as well as a store of value and ‘sound money’ — but how does Bitcoin compare to gold?

Gold
Gold (Au) is a precious metal that has been used in jewelry, coinage, and other arts for thousands of years. It is regarded as valuable for several reasons. First of all, gold is extremely rare. There are only about 186,700 tonnes of gold above ground (as of 2015), with 50% of it being consumed in the jewelry industry, 40% in investments, and 10% in industry.

According to the basic law of supply and demand, if something is high in demand and low in supply, its value will be quite high. As demand increases, the price of gold increases; as demand wanes, the price declines.

Three main factors, rarity, durability and beauty, give gold an enduring value which few other items can compete with. While land also has enduring value, it cannot be moved or exchanged without representing ownership in the form of a verbal or written agreement. Gold can be owned or exchanged by simply possessing the physical gold and exchanging it from hand-to-hand.

Bitcoin, in contrast, does not have any physical form or shape and is not composed of any physical elements. This leads to the common accusation that Bitcoin has no essential, inherent, or intrinsic value. Gold can be touched, carried, moved, or shaped, whereas Bitcoin exists in digital form. In that sense, it seems very ethereal or intangible. It is easy to see, therefore, how the simplistic argument could be made that Bitcoin has no intrinsic value. However, we must go back to the question of what value actually is and how prices are determined.

As mentioned earlier, price is determined by the law of supply and demand....