The price of Bitcoin (BTC) will outperform gold in the long run, and BTC holders should not sell their coins to pour into gold during its meteoric run to prices above $4,000 per ounce, according to Bitcoin advocate, educator and market analyst Matthew Kratter.
BTC is a better store of value based on scarcity, portability, verifiability, divisibility, and other characteristics of money, Kratter said. He added:
“Gold supplies have increased somewhere between 1-2% annually for decades, if not for centuries. Now, this may not seem like a lot, but it leads inevitably to gold supplies doubling every 47 years.”
The steadily increasing supply of gold can be exacerbated by sudden discoveries of large, untapped gold deposits, which exist within the earth’s crust and in space, he said.
The influx of new gold into Europe from the Americas during the 16th century destroyed the Spanish and Portuguese empires due to the inflation from massive quantities of gold hitting the market suddenly, Kratter added.
Market analysts continue to debate whether gold or BTC is a better store of value and medium of exchange, with Bitcoiners arguing that BTC is a natural step in the evolution of money and gold bugs arguing that BTC is still too new and volatile to be a store of value.
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Gold suffers from ancient problems and cannot be the monetary base in a digital world
“It’s very expensive to ship and ensure large amounts of gold, so it is a very poor way of settling trade imbalances,” Kratter said.
Moving even small quantities of gold through an airport or other “heavily surveilled” environments is a difficult task, and moving meaningful quantities of gold is “almost impossible,” according to Kratter.
Gold’s physical properties make it particularly unfit for online finance and sending value through the digital world, he added.
Gold cannot be sent over the internet, and tokenized gold products, physical gold held by a financial custodian that is represented on a blockchain, introduce counterparty risk, Kratter said.
These risks include the issuer minting more gold tokens than physical gold in reserve, refusing to redeem the digital tokens for physical gold, or potential government confiscation of physical reserves, he said.
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