Bitcoin vs. Gold and how to generate long term value
The electric car manufacturer Tesla, the payment company Paypal, the investment giant Blackrock and most recently Mastercard – to name a few well-known players who have announced that they intend to accept bitcoin as a means of payment or investment object.
And basically, it is a digital currency but has become more of an investment in times where people have become more risk-averse.
What many people ask themselves is: What determines the value of the digital currency and why does it rise so in value? Bitcoin is just a bunch of ones and zeros in a computer.
Johan Javeus has written several analyzes on the topic of cryptocurrencies. As a means of payment, bitcoin is quite clumsy. He, therefore, sees bitcoin mostly as an investment, like gold whose value is also based solely on what buyers and sellers agree on.
Gold has for hundreds of years been seen as a safe investment in troubled times, but why then really? Gold has no major real use in today’s society and is not used as a means of payment.
“No one who runs around with gold in their pockets.” – Johan Javeus
Gold and bitcoin have several similarities, according to Javeus. It is available in limited quantities. There are also no counterparties that guarantee its value, in contrast to, for example, a hundred kronor note whose value is guaranteed by the Riksbank.
But as the world’s central banks pump out gigantic support packages in the wake of the financial crisis and the pandemic – in reality, central banks have run the banknote presses for high pressure – there is a fear of future inflation, the value of cash falls.
But if gold has proved to be quite stable in terms of value, bitcoin is the exact opposite, at least so far. And the value has crashed before.
The sometimes extreme changes in value therefore hardly make the cryptocurrency a particularly safe investment.
“Before we know what role this currency will play in the future, it is difficult to put a value on it.” – Johan Javeus
Limited amount of Bitcoins
The value of all outstanding bitcoins at the beginning of February 2021 amounted to 690 billion dollars, approximately 5,700 billion kronor. That figure can be compared to the value of all the physical gold in the world, which today is worth almost $ 9.5 trillion. In just over ten years, as long as bitcoin has existed, the cryptocurrency has reached just over seven percent of the value of all gold.
There are also thousands of other cryptocurrencies, but bitcoin is clearly the largest and accounts for about two-thirds of the total value.
Bitcoin is extracted by powerful computers in so-called blockchain technology. In the mathematical model, the number of bitcoin is maximized to 21 million. The new bitcoins that are added are halved every four years. In 2140 it is stopped. So far, about 18.6 million bitcoins have been mined, but many have disappeared in discarded hard drives, among other things, so it is estimated that there are almost 15 million bitcoins on the market.