Bitcoin as Digital Gold: Can BTC Become the New Standard?

Bitcoin is more and more frequently touted as a hedge against inflation, and in 2021 it is even getting recognition as a legal tender. Does it mean that Bitcoin as digital gold could become the basis of a new standard for money? Our team takes a deep dive into the narrative to find out!

Bitcoin as Digital Gold

Gold and Properties of Money

When we are thinking about the history of money, most likely, we will remember the role of gold. It is a valuable metal which was used for luxury goods and money for a long time.

  • Durability;
  • Divisibility;
  • Portability;
  • Cognizability;
  • Scarcity.

Why is Gold Valuable?

Gold used to be a basis for monetary systems for its scarcity and applications. It was adopted for its scarcity, resistance to corrosion and cognizability.

History of Bitcoin

Before Bitcoin and cryptocurrencies, digital currencies were going the path of legacy monetary systems: first electronic money were representations of fiat currencies.

BTCUSD chart
BTCUSD chart
Source: TradingView

Bitcoin vs Gold

As Grayscale analytics put it, Bitcoin cannot be valued in the same way as stocks because it does not generate cash flow. Instead, to estimate its value, it is reasonable to use supply/demand and relative valuation — as it is done for gold.

  • Bitcoin is resistant to inflation: its emission slows down roughly every 4 years, making it disinflationary;
  • Like gold can be used in electronics and chemistry, Bitcoin itself has value as the first real application of blockchain technology, for example, for peer-to-peer value transfers.
  • Divisibility: 1 BTC can be split into 1,000,000,000,000 satoshis;
  • Portability: BTC can be accessed from any location;
  • Scarcity: there is a limited amount of BTC in existence.

Bitcoin vs Gold Correlation

Bitcoin vs Gold Correlation
Bitcoin vs Gold Correlation
Source: Longtermtrends
Bitcoin vs Gold price change
Bitcoin vs Gold price change
Source: Longtermtrends

Tweets about Bitcoin as Digital Gold

Conclusion

The Bitcoin community is now closely watching whether more countries adopt BTC as legal tender. In that case, Bitcoin as digital gold will finally be recognized worldwide.