Could Bitcoin Replace Gold As a Secure Investment?

Written by: Ryan Cook

Most people become familiar with the Winklevoss brothers either from their ventures in the business world, or their role in the creation of Facebook and the movie The Social Network. But not as many people know about their recent business ventures—the twins have delved into the skyrocketing world of Bitcoin. And are making bank. 

Anyone in the Bitcoin world has most likely dabbled in Gemini, the extremely successful cryptocurrency exchange founded by the Winklevoss twins. Gemini and other cryptos seem to be the future of money. On their website, it states that “Crypto is not just a technology, it’s a movement.” 

But is the crypto craze here to stay? And just how far will it go? Many are betting that Crypto, and Bitcoin, in particular, will continue to skyrocket to the point where it will eventually replace gold as a long-term financial asset and shield against inflation.

Bitcoin Is A Finite Resource

Humans have adored gold for thousands of years. It’s not only loved as jewelry, it’s used in electronic circuitry, dentistry, medicine, aerospace, and even in pipe sealants. And because it’s a finite resource, it’s very valuable. The price of gold is currently at more than $1,800 per ounce. But just like gold, bitcoin is also a finite resource. There are only 21 million bitcoins total, and of those, only 18 million have been found by crypto miners - powerful computers that crunch mathematical equations all day long looking for the correct sequence that marks a new bitcoin. Proponents of bitcoin argue that the price per coin will only rise as we get closer to that 21 million limit. 

An argument also exists that bitcoin is even more finite than gold. As space technology continues to advance and as Earth’s limited resources continue to diminish, mining asteroids for precious metals may become a common practice. And what happens when humans suddenly have access to $700 quintillion in gold from a harvested asteroid? You don’t need a degree in economics to know that the scarcity value of gold will dissolve over night. It’s anyone’s guess how long we have until mining asteroids becomes common practice, but it’s a possibility worth considering if you hope to store  generational wealth in gold. 

Younger Generations Don’t Care About Gold

The Gen Z generation (those born between 1996-2010) are less infatuated with gold than other generations. Research has shown that Gen Z consumers are less likely to invest for the long term and are less emotionally connected to gold as a valuable commodity. Those who are investing are looking to other options—like bitcoin and crypto. 

According to the WGC report, Gen Z-ers are “more likely to want to see exponential growth from their investments, less likely to invest for the long-term, and less likely than the average retail investor to worry about the impact of a financial crash on their savings."

It also shouldn’t come as a surprise to anyone that younger generations naturally have more trust in digital banking and internet assets than their predecessors. 

The World Has A Growing Need For A Global Currency

As global transportation cheapens and communication and informational walls crumble nationally, the global market is in desperate need of an intuitive and simple way to buy and sell goods without passing through complicated foreign exchange processes. It seems only natural that sooner or later we will find some kind of electronic asset that can be easily passed around. Enter: crypto currency.  Cryptocurrency exists independent of all governments and regulatory organizations, and it seems like the natural solution. It may be that in the future, crypto is to buying and selling stuff on the internet as gold is to buying and selling stuff in brick and mortar stores. The world we live in continues to move out of the physical realm and deeper into a digital one. 

Cryptocurrency Risks

There are some drawbacks and risks to investing in Bitcoin and other cryptocurrencies, however. For example, since it’s an unregulated market, you have no safety net. If you lose your password to access your bitcoin you will never be able to access your bitcoin again. Period. And if your account gets hacked on a crypto exchange and someone steals your bitcoin, it’s gone forever.

Additionally, because crypto is still in its infancy compared to other forms of payment, governments aren’t too worried about it yet. If it continues to gain popularity, however, it’s possible that global governments will become jealous of the unregulatable currency that’s outcompeting their own currencies, and they may implement complicated laws, regulations and tax codes to make cryptocurrency more inconvenient and therefore drive down its value. 

Furthermore, just like with any investment, uncertainty is part of the equation. Whether crypto is a hot fad of the 2000s or whether it truly has potential to replace something as tried and true as gold is a debate that’s far from settled. 

Related: Believe It or Not, Bitcoin Hype Isn't Out of Control...Yet