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 Bitcoin Works?
Bitcoin is based on the blockchain, a distributed digital ledger. As the name implies, blockchain is a connected database made up of blocks that hold information about each transaction, such as the date and time, total value, buyer and seller, and a unique identifier for each exchange. Entries are linked in chronological sequence, forming a digital chain of blocks. Blockchain is decentralized, meaning a centralized institution does not own it
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.
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.
How To Create Bitcoin Account?
Firstly, Go to the WazirX website and sign up. Then, a verification mail will be sent to you. The link sent via verification mail would be available only for a few seconds so make sure you click on the link sent to you as soon as possible, and it will verify your email address successfully. The next step is to set up security, so select the most suitable option for you. After you have set up the security, you will get a choice to either proceed further with or without completing the KYC procedure. After that, you will be directed to the Funds and Transfer page, where you could start depositing Bitcoins to your wallet. You can also deposit INR and then use it to buy Bitcoin for your WazirX Bitcoin wallet.
How Many Bitcoins Will Ever Be Created?
The source code of Bitcoin stipulates that it must have a restricted and finite quantity. As a result, only 21 million Bitcoins will ever be generated. These Bitcoins are added to the Bitcoin supply at a predetermined rate of one block every ten minutes on average. The supply of Bitcoins will be depleted once miners have unlocked this number of Bitcoins. It's possible, however, that the protocol for Bitcoin will be altered to allow for a higher supply.
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 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 Is The Meaning Of Bitcoin?
Bitcoin is a type of cryptocurrency that was first introduced in January 2009. It is invented based on the key concepts and notions presented in a whitepaper by Satoshi Nakamoto, a mysterious and pseudonymous figure. The name of the individual or people who invented technology is yet unknown. Bitcoin promises reduced transaction fees than existing online payment methods, and a decentralized authority controls it, unlike government-issued currencies.
How Does Bitcoin Technology Work?
The blockchain is the foundation of Bitcoin. It is a decentralized, distributed ledger that tracks the provenance of digital assets. The data on a blockchain can't be changed by design, making it a real disruptor in industries like payments, cybersecurity, and healthcare.
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.
