Can BTC Truly Match Gold as a Safe Haven?

In Insight

2020 has been a spooky year. In case you hadn’t noticed, there’s this thing called “COVID-19” going around that’s causing a bit of a stir. Nowhere in the world is safe from this crisis - and those taking the longview are looking beyond the health concerns, to the economic concerns which are sure to be equally long lasting. Unemployment is a major issue worldwide and many traditional markets have yet to recover to the start of year levels.

In times like this, it’s all too natural to look to reposition one’s finances into the safest possible asset types - stocks are unpredictable under conditions like these, and fiat currencies face the ever-lurking dangers of inflation. The prepper’s choice of asset has typically been precious metals (if not guns and ammo) - based on the fairly reasonable assumption that metals like gold and silver have been valued relatively consistently across human history, and that’s not likely to change anytime soon.

Bitcoin has often been raised up as “digital gold” - that is, a reliable long-term store of value, especially when its ability to function as an actual currency has at times come into question. But can BTC truly play this role as well as gold can in times of crisis and instability? The first step towards answering this question is asking another question: what are desirable traits in a ‘safe haven’ asset?

Assurance of Value

Naturally, you don’t want your safe haven asset to have its value vulnerable to radical change. Scarcity and demand play an important role in ensuring anti-inflationary properties, and both gold and BTC are scarce indeed - though Bitcoin does have the advantage that its current and future supply are known exactly, whereas gold is far more uncertain and difficult to measure.

One notable drawback of gold is that it is easily counterfeited or devalued through added impurity. An expert can help forestall this hurdle, but there’s no such issue with BTC - it’s transparently verifiable by any potential party to a transaction. It’s simply impossible to counterfeit Bitcoin.

Security, Storage & Portability

Any safe haven asset needs to be secure, storable and portable - this is one reason why real estate is not so desirable in volatile times as you can’t pack up a piece of land and take it with you should you need to move locations.

At this point, it’s worth mentioning that not all gold investments are equal - there’s physical gold, and there’s paper gold. Physical gold is really the only way to ensure you won’t be stuck holding a worthless receipt - but on the other hand, its physicality can be a downside. Good luck making international payments of any kind happen with gold. And you’d better think long and hard about where to keep your gold, because it’s an obvious and easy target for thieves or other interested parties. It’s easy enough to secure gold in a safe at home, but it gets much more complicated when you’re on the go.

Bitcoin, on the other hand, shines here. It brings options - you can opt for a secure physical wallet, which is easily disguised. Or you can keep a digital wallet, which obviously takes up no space at all. Either way, even if someone happens to lay eyes on your BTC wallet, there’s no external or physical indicators showing how much value is contained. Of course, it’s possible to get scammed out of your Bitcoin - that’s why it’s crucial to always maintain good security practices. BTC also offers the great advantage of essentially infinite portability and usability, as long as there’s a willing taker. BTC is the clear winner here.

Acceptability, Durability & Liquidity

In a safe haven asset, durability is crucial - this is in fact one of the reasons why precious metals like gold are considered precious, as they are highly resistant to physical damage and degradation, unlike other metals such as copper or iron. Bitcoin is, of course, infinitely durable as long as we still have web infrastructure & electricity. Gold isn’t far behind though.

Acceptability is a bit of a paradox, as Bitcoin does lag behind gold in terms of being recognized as an asset. Anyone in the world knows gold is valuable - but despite the progress cryptocurrency has made, there are still countless millions of crypto skeptics, and yet more folks who haven’t even heard of Bitcoin.

Conversely, Bitcoin is currently accepted as a method of payment in many places, and its acceptance is likely to only become more widespread as time passes. You can’t exactly walk up to many merchants, throw some gold on the table and expect to have a smooth transaction. Not to mention divisibility - gold is rather difficult for the average person to divvy up for use in smaller portions. BTC couldn’t be easier.

Price Action in 2020

Gold, playing true to its reputation, has surged from circa $1500 early in 2020 to near $2000 as of mid-August, hitting an eight year high. BTC, not to be outdone, started the year in the $7000s and has recently soared up to the $11k-12k range - an increase in the realm of 50%. (Though it should be noted that there was a significant dip in March - it’s never a straight line with Bitcoin). While the cryptocurrency still has some catching up to do to match the highs of the late 2017 bull run, BTC looks hale and hearty as it ever has, and is demonstrating strength under adversity quite convincingly.

Conclusion

Bitcoin or gold? In the end, only you can make the right choice for yourself - and there’s far more information and analysis available than can be fit into a single article. And all that said, it never hurts to diversify. But frankly, they may very well both be winning choices to ride out the upcoming storm - and only one of them is available instantly with Liquid Buy & Swap. Whatever you choose, good luck, stay safe, and happy trading.

 

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