A store of value asset is one whose value remains preserved over time without depreciation. Such assets can be stored, retrieved, and exchanged in the future, with their value expected to remain the same or increase.
Generally, assets like gold, currencies, and certain digital assets are considered stores of value due to their ability to maintain purchasing power over time. However, in recent years, Bitcoin has emerged as a new competitor.
Amid economic uncertainty, it’s essential to choose investment instruments that can protect your assets from economic shocks. Read on to determine which investment is better for preserving asset value.
- Historical Stability and Track Record
Gold has been used as a store of value for thousands of years. From ancient Egyptian civilizations to the present day, gold remains reliable. Its deep-rooted value in human history and culture makes it a universally accepted form of wealth.
Gold has withstood the test of time through various economic cycles, wars, and financial crises. Its price fluctuates, but gold consistently retains its intrinsic value over centuries.
In contrast, Bitcoin, introduced in 2009, is relatively new. Despite its novelty, Bitcoin has attracted significant attention due to its high returns and rapid price increases.
- Intrinsic Value and Tangibility
One key difference between gold and Bitcoin is that gold has intrinsic value. This means that gold’s value is not only based on market perception or sentiment but also on its physical properties and utility.
Bitcoin lacks intrinsic value. Its value depends entirely on how much people are willing to pay for it. While this can drive speculative gains, it also means Bitcoin’s value can be highly volatile and heavily influenced by market sentiment that can change rapidly.
Although digital gold and Bitcoin lack physical form, digital gold on Treasury can be converted into physical gold according to the gram amount listed on the app. This ensures that digital gold retains its intrinsic value.
- Regulation and Market Maturity
Gold is a well-regulated commodity with established markets and trading systems, ensuring transparency and liquidity. Investors can buy, sell, or trade gold confidently, as they participate in a mature and stable market.
Conversely, Bitcoin is still in the early stages of regulatory development. The lack of comprehensive regulation makes Bitcoin more susceptible to market manipulation, fraud, and uncertainty. Regulatory changes can significantly impact Bitcoin’s price, adding another layer of risk absent in gold.
- Market Volatility
Bitcoin is known for its extreme price volatility. Since its inception, Bitcoin has experienced dramatic price changes, with values rising and falling by thousands of dollars within days or even hours.
The significant and rapid price fluctuations driven by market sentiment make Bitcoin a risky asset for those seeking to preserve wealth in the long term.
In contrast, while gold prices do fluctuate daily, these movements are generally more predictable. Gold price changes are influenced by factors such as inflation, U.S. central bank interest rates, and geopolitical events. On average, gold price changes are less extreme and more manageable.
- Global Acceptance and Liquidity
Gold is universally recognized and accepted as a store of value. It can be easily traded or sold anywhere in the world, providing high liquidity. This global acceptance ensures that gold can be used as a medium of exchange.
Bitcoin is widely known today but has not yet achieved universal acceptance as a medium of exchange. Its liquidity remains limited compared to gold.
Moreover, Bitcoin’s liquidity can quickly diminish during financial crises or extreme volatility, making it challenging to sell or trade.
- Protection Against Inflation
Gold has long been used as an effective hedge against inflation. When a country’s currency value declines due to inflation, gold prices tend to rise, preserving purchasing power. Central banks worldwide hold gold reserves as a safeguard.
Bitcoin proponents argue that it can also act as a hedge against inflation due to its limited supply. However, Bitcoin’s short history and extreme price volatility make it difficult to prove its effectiveness in enduring inflationary pressures.
- Environmental Impact
The primary goal of investing is to protect asset value for the future. However, have you considered the environmental impact of your investments?
Gold mining has environmental impacts, including carbon emissions. It is documented that each gram of gold you invest in generates 0.028 tons of carbon emissions.
Similarly, Bitcoin has a detrimental environmental impact due to its high energy consumption. Bitcoin mining requires substantial electricity, contributing to global warming and environmental degradation.
As concerns about climate change and environmental impact rise, Treasury, as a digital gold provider, addresses these issues proactively.
Gold is an innovation from Treasury designed to make it easier for you to invest in digital gold while also protecting the environment. Green Gold is a carbon offset initiative, aiming to balance greenhouse gas emissions by absorbing carbon footprints.
By investing in gold on Treasury with the Green Gold feature, you contribute to transparent and sustainable tree planting efforts, an effective way to absorb carbon footprints.
Based on the above review, gold is a better choice for investors seeking safer wealth protection and wanting to avoid extreme volatility.
Although Bitcoin offers significant growth potential and attracts many risk-tolerant young investors, making it suitable as part of a diversified portfolio with limited exposure, gold remains a safer and more stable long-term investment option. Its benefits of price stability, inflation protection, clear regulation, and physical security make gold a reliable store of value.
