Global inflation is at its highest point in 40 years and the economy looks more vulnerable than ever. Many experienced investors then immediately think of good to protect their portfolio against the rough financial seas that may await us.
Since time immemorial, gold has been the asset that everyone has reached for to protect themselves from inflation. Bitcoin is known as the digital gold, but could it be a better investment than gold? Let’s compare the two.
Valuable
The main reason for people to invest in gold is the precious metal’s ability to maintain its purchasing power. This has to do with the natural scarcity of gold. It is difficult to find the precious metal and that ensures that gold always has low inflation. The gold supply is growing on average by 1 to 2 percent per year. Bitcoin has the same property and the interesting thing is that inflation for Bitcoin eventually goes to zero. Once there are 21 million Bitcoin in circulation, nothing more will be added.
More and more people therefore see Bitcoin as the better alternative investing option, simply because Bitcoin’s scarcity is absolute. That is probably why gold has had a relatively difficult time in recent years. For example, whoever bought gold in September 2011, was only in the green again with his investments in July 2020. However, in Bitcoin’s history, it has never taken more than three to four years for the price to surpass its previous all-time high.
Bitcoin a better protection against inflation
In general, gold is considered a good protection against inflation because the gold price often coincides with the rise in price inflation. However, if we zoom in on the chart, we see that gold has only appreciated 21.84 percent in the past two years. Bitcoin, on the other hand, can show a 311 percent increase in value. Although it may not be entirely fair to compare both assets in this short time frame.