This article intends to investigate which of the two “safe-haven” assets offers a better wealth preservation strategy in the new market environment. A detailed and brief comparison of the characteristics and history of gold and Bitcoin has been conducted to render meaningful results for the decision-makers.
Introduction
Gold through millennia has been a longstanding asset, yet today companies are adopting Bitcoin and including it as an asset class on their balance sheet.
This research aims to investigate a question that addresses the future wealth preservation strategy for Ultra High Net Worth Individuals and Family Offices rather than whether to invest in these assets at all.
A Brief History of Gold as a Safe Haven Asset
Since the beginning of history, gold has been the gold standard of preserving wealth. Gold’s rarity, endurance, and rather positive standing in the minds of many people have made it one of the most common ways of storing value during a variety of economic crises.
Why Gold has Endured
The history of gold shows that it has always been a viable way to protect against inflation, currency devaluation, and geopolitical instability. Gold has always preserved its value thanks to the following:
Scarcity
Rarity
Recognizable long-standing value
Historical reputation as a symbol of wealth and stability
Limited supply and intrinsic value
Polar to inflation a value competent that common by money
Gold has been circulating for much longer than any forms of money – therefore, it inspires confidence.
Gold has already been used in times when big economies were going through the crisis:
The Great Depression.
Post-WW2 inflation.
2008 Financial Crisis.
Most recent inflationary pressures because of money printing.
The Rise of Bitcoin as Digital Gold
Bitcoin, known as “digital gold,” was developed to offer a decentralized option to typical currencies. Over the last ten years, Bitcoin has developed as a store of value and a particularly useful one for any individual who was searching for a way to protect themselves from the risks associated with the existing financial system.
Bitcoin’s Unique Value Proposition
Bitcoin’s unique value proposition is that a science-based algorithm ensures a set and restricted amount of 21 million bitcoins. While gold is a scarce element, there is no restricted amount of gold that can be mined. Therefore, Bitcoin is the only restricted asset in the world.
Comparing the Key Characteristics
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Tangibility and Security
As a physical asset, gold must be held and secured away, while Bitcoin is a digital asset secured via encryption, yet it also involves protection measures.
Liquidity
Bitcoin has quicker leverage because trading is electronic and may be executed almost immediately on digital exchanges, while gold has some degree of liquidity due to physical handling’s demand, and delivery might be delayed.
Portability
Both gold and Bitcoin are excellent ways to protect your assets. Gold is a genuinely stable and physical asset since it has been economically acknowledged for hundreds of years. Nevertheless, the usefulness of gold is restricted due to its inherent handling and the cost of keeping it secure. Bitcoin, on the other hand, is a modern technique with minimal limitations. There is only one restriction to gold – it has a handling fee if you have more than it requires to store.
Market Volatility
While gold has increased by 90%, bitcoin is 9120% higher. Regardless of gold being an asset that people have trusted for millennia, this has been evident for the last 8 years, and the winner is clear. Therefore, which one is better for preserving wealth, gold or bitcoin?
Which Is Better for Preserving Wealth?
Each asset has its strengths, but which one is truly better for preserving wealth in today’s economic environment?
The Case for Gold
Gold gives you its reputation, a well-defined use case about why it has lasted thousands of years, and a global market that you trust. Unlike our fiat currency, gold does not right or left-hand value, but it will always have value. And as it has lasted for thousands of years, you can “trust” it to store some of your wealth as well.
The Case for Bitcoin
In contrast, Bitcoin gives you an asymmetric return opportunity, the most usable transferable asset in human history, and a store of value that you can trust beyond borders. Unlike other assets, real wealth can be fundamentally generated with Bitcoin, as we have mainly seen in the last decade. For upcoming investors looking for opportunities, Bitcoin's value and utilities are likely to increase, making it a superior choice for those embracing virtual assets for wealth creation and preservation.
Making the Right Choice for Your Wealth Preservation Strategy
Ultimately, the decision between Bitcoin and gold will depend on your personal investment goals, risk tolerance, and views on the future of the global financial system. For UHNWIs and Family Offices, diversifying between these two assets might offer the best of both worlds. Although due to the flexibility, convenience and rapid growth many parties are starting to place bitcoin in their balance sheet. Contact Us on our website to help you learn more about Bitcoin.
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