World-renowned financial magazine Bloomberg has recently published a report, wherein it has revealed that Bitcoin can soon attain gold-like value. The coronavirus outbreak had induced a momentary stock market tailspin, but Bitcoin is back on track with its bull run. In general, investors tend to compare new asset classes with the traditional ones, and today, we are going to answer some common queries about Bitcoin as digital gold.
Gold – Our Most Trusted Asset
Humans have highly valued the yellow metal since time immemorial. In ancient Europe, gold was an integral component of various temple rituals. Even in the modern world, gold serves as the paramount choice for jewelry. The importance of this precious metal has been retained nonetheless. Gold has also played an important role in shaping the U.S. economy, given its rarity. The value of each dollar was pegged against a certain amount of gold until President Nixon ended this practice in 1971.
According to the renowned ancient philosopher Aristotle, any means should cover these three following attributes for being treated as money:
- It should act as a store of value.
- It should act as a medium of exchange.
- It should possess a unit of account.
Coming to modern times, gold is not used as money anymore. Rather it is used in the form of jewelry and a store of value. However, it has also gained importance in other spheres like dentistry, electronics, and aerospace. The country’s health is also indicated by the price of gold, which remains lower during the spans of expansion. Similarly, the gold price rises during the inflation phase. As the financial market crashed mid-September in 2008, the gold price bounced below $740 per ounce, while it rose over $1900 per ounce in August 2011.
The Highly Volatile Bitcoin
Bitcoin was incubated in 2008 for providing the global population with a currency that shall not be controlled by any bank or government body. The main idea was to create a decentralized currency to solve all the problems faced by fiat currencies. Initially, Bitcoin had a negligible value but this crypto started gaining global traction on 9th February 2011, when it attained parity with USD. The Bitcoin price in INR during that time also corresponded to one dollar.
Bitcoin’s price skyrocketed from $4.6 to $426 between 2011 to 2015, which accounted for a growth of 9000%. This kind of unprecedented growth has never been seen in finance history, which made investors around the world sit up and take notice of this new contender to traditional currencies. The BTC rate in India today is 1146172 INR.
But just like other cryptocurrencies, Bitcoin suffers from an inherent limitation, and that is its high level of volatility. This has made it a component of the high-risk asset category coupled with double-digit variation, which occurs daily. Irrespective of all this, the profitability of Bitcoin is undeniable.
Gold Versus Bitcoin
For being considered as digital gold, Bitcoin needs to possess certain attributes. Let’s check each of them to gain a clearer knowledge of the criterias it fulfills:
- Bitcoin and gold are both excellent means of exchange as both can be traded for goods and services.
- Just like gold can be divided into quarter or half ounces, you can also divide Bitcoin up to 1 satoshi (the smallest unit of a bitcoin) while converting them in bitcoin exchange India. This validates Bitcoin’s claim as a unit of account.
- While Bitcoin served as a store of value previously, its role amidst the current market turmoil has made bitcoin skeptics argue that the intangible nature of bitcoin causes it to have zero intrinsic value.
Recent Advancements
Mike Novogratz, the billionaire investor, and CEO at Galaxy Investment Partners, recently revealed that Bitcoin’s price is expected to go higher as digital gold. This is going to cause more and more people to wish for Bitcoin as a considerable portion of their entire portfolio. He further added that Bitcoin will not gain acceptance as a transactional currency in the coming five years. He shared his thoughts on Radio and Bloomberg TV, where he vouched for Bitcoin to serve as a store of value.
Various crypto aficionados around the globe have raised concerns about central banks printing money to counter the pandemic. This can bring about inflationary trends in days to come. Different central banks around the globe are trying to create their indigenous digital assets, and China is already in the path of testing out a digital yuan. PayPal Holdings Inc. allowed customers to make transactions in cryptocurrencies around a year back. This has helped its large user base to hold, buy and sell cryptos like Ether, Bitcoin, Litecoin, and Bitcoin Cash using their digital wallets. They can even shop from the 26 million merchants enlisted with PayPal using their crypto holdings.
Novogratz has forecasted that companies like Visa Inc., E*Trade Financial, American Express Co., and Mastercard Inc. will follow suit within 12 months by offering its enlisted merchants to transact in cryptocurrencies and stable coins. Without a doubt, blockchain will develop into an integral part of our financial infrastructure, and every company needs to prepare themselves to be a part of these winds of change.
Final Words
People are finding a safe haven in this numero-uno crypto which is helping with its mainstream adoption. Tracy Alloway, a financial journalist for Bloomberg, has shared bullish predictions for BTC. She added that Bitcoin has served as a means for making payment, hedge against inflation, speculative, and financial assets which can benefit its holders when interest rates are minimal. The opportunity cost of holding Bitcoin is very less and this further strengthens its stronghold as digital gold. An enduring decline of cryptos has been experienced in this COVID-19 pandemic, but BTC is expected to appreciate in the days to come, given its attributes of a hedge asset. The pandemic will tag along with specific macroeconomic effects, which will add inertia to Bitcoin’s process of appreciating in value compared to peer cryptos.
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Frequently Asked Questions
How To Convert Bitcoin To Cash?
There are many ways of converting Bitcoin to cash, such as crypto exchanges, Bitcoin ATMs, Bitcoin Debit Cards, Peer to Peer Transactions. You can use cryptocurrency exchanges such as WazirX for this. Unlike typical ATMs, which allow you to withdraw money from your bank account, a Bitcoin ATM is a physical location where you may buy and sell Bitcoins using fiat currency. Several websites provide the option of selling Bitcoin in return for a prepaid debit card that may be used just like a standard debit card. You can sell Bitcoin for cash through a peer-to-peer platform in a faster and more anonymous manner.
What Is Meant By Bitcoin?
Bitcoin is a digital currency that was initially released in January 2009. It is based on ideas offered by Satoshi Nakamoto, a mysterious and pseudonymous figure, in a whitepaper. The name of the person or individuals who invented technology has not been revealed. Bitcoin promises lower transaction fees than other online payment systems, and unlike government-issued currencies, it is decentralized.
Is Bitcoin Safe And Legal In India?
In 2020, the Supreme Court of India lifted the RBI’s restrictions on cryptocurrencies. According to the Supreme Court, the existence of Bitcoin or another cryptocurrency is unregulated but not unlawful. The verdict has greatly aided the world of digital money in the country. To put it another way, investing in Bitcoin is perfectly legal, and you may do so through various apps and traders.
Is Bitcoin Cash A Good Investment?
Bitcoin Cash is a hard fork of Bitcoin formed in 2017 to address Bitcoin's scalability and challenges. Bitcoin Cash seeks to make global transactions faster, cheaper, and more secure. Bitcoin Cash is now accepted by thousands of online and offline businesses all over the world. Studied correctly, Bitcoin Cash may be an investment worthy of consideration.
What Is Bitcoin Used For?
Bitcoin was created as a means of sending money over the internet. The digital currency was designed to be a non-centralized alternative payment system that could be used in the same way as traditional currencies. Bitcoin is being used by an increasing number of businesses and individuals. This includes establishments such as restaurants, apartments, and law firms.
Can Bitcoin Be Converted To Real Money?
Crypto exchanges, Bitcoin ATMs, Bitcoin Debit Cards, and Peer Peer Transactions are all options for converting Bitcoin to cash. This can be accomplished by using Bitcoin exchanges such as WazirX. A Bitcoin ATM is a real place where you may purchase and sell Bitcoins with cash, unlike standard ATMs that allow you to withdraw money from your bank account. Many websites provide the option of purchasing Bitcoin in return for a prepaid debit card that works similarly to a standard debit card. Through a peer-to-peer marketplace, you may sell Bitcoin for cash faster and more privately.
How Does Bitcoin Work?
The blockchain, a distributed digital ledger, is what Bitcoin is based on. As the name suggests, blockchain is a linked database made up of blocks that store information about each transaction, such as the date and time, total amount, buyer and seller, and a unique identifier for each exchange. Entries are linked in chronological order to form a digital blockchain. Entries are linked in chronological order to form a digital blockchain. Blockchain is decentralized, which means any central authority does not control it.
Who Created Bitcoin?
Bitcoin is the first application of the concept of "cryptocurrency," first articulated in 1998 on the cypherpunks mailing list by Wei Dai, who proposed a new form of money that relies on cryptography rather than a central authority to manage its creation and transactions. Satoshi Nakamoto published the initial Bitcoin specification and proof of concept on the cryptography mailing list in 2009. Satoshi exited the project in late 2010, with little information about himself available. Since then, the community has evolved, with numerous people working on Bitcoin. Satoshi's anonymity has sparked unfounded fears, many of which may be traced back to a misunderstanding of Bitcoin's open-source nature.
How To Invest In Bitcoin?
Bitcoin may be invested in two ways: through mining or exchanges. Bitcoin mining is carried out by high-powered computers that solve challenging computational arithmetic problems that are too difficult to complete by hand and complex enough to tax even the most powerful computers. WazirX, a Bitcoin exchange, is another alternative.
What Are The Chances Of Bitcoin Crashing?
Two Yale University economists (Yukun Liu and Aleh Tsyvinski) produced research titled "Risks and Returns of Cryptocurrency" in 2018. They looked at the possibility of Bitcoin crashing to zero in a single day. The authors discovered that the chances of an undefined tragedy crashing Bitcoin to zero ranged from 0 percent to 1.3 percent and was around 0.4 percent at the time of publishing, using Bitcoin's history returns to determine its risk-neutral disaster probability. Others claim that because Bitcoin has no intrinsic value, it will inevitably crash to zero. On the other hand, Bitcoin advocates argue that the currency is backed by customer confidence and mathematics.
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
