There was a time when people flocked to gold as a hedge against economic worries and/or the devaluation of fiat (paper) money. Move over gold, here comes Bitcoin! Despite the crackdown in China on cryptocurrency, the digital token has once more spiked to a value of about $4,000 this week. It has doubled in value in the past three months, shrugging off China’s crackdown after only a brief wobble.
You could purchase Bitcoin for as little as $2 just six years ago. By way of comparison, it took gold nearly 40 years to double in value to its current worth of approximately $1,325. While Bitcoin has shot up from $2 to $4,000 in the past six years, gold’s value has plummeted from about $1,650 per ounce in 2011 to about $1325 today.
There’s more. You have to convert gold to a recognized currency before you can buy anything with it. On the other hand, with Bitcoin, you can purchase a plethora of products.
“I believe there is a strong chance that it may someday revolutionize significant parts of our financial infrastructure,” comments Aaron Hanson, a software engineer from Chicago. He has used Bitcoin to pay for everything from restaurant meals to airline tickets.
Bitcoin surfaced in 2009 from someone using the name Satoshi Nakamoto. Since then, it has evolved from a cult curiosity to a more mainstream investment choice. The digital currency, whose finite quantities are created by computer programs, trades outside the traditional financial system. This is attractive to those who are worried about devaluation of paper money, as well as those who simply want an alternative to established institutions.
“There’s certainly a libertarian feel” to the beliefs of bitcoin users, says Melanie Shapiro, CEO of Token, an identity ring maker in New York, “But we’re technologists, and technology provides freedom” from centralized government systems.
Bitcoin is legal tender in the US and in most major industrialized countries in the world. Yet half of those polled in the US aren’t sure of it’s legality, while 11% think it is illegal. One can only imagine how much more the value could appreciate as people become more aware and accepting of Bitcoin. A foreshadowing may be seen in Japan’s legalizing bitcoin on 1 April 2017. At the time, the digital currency was worth about $1,000 per token. Adding to further excitement about the future of bitcoin, 40% of Americans polled were open to using Bitcoin in the future.
Austin Craig, a practicing Mormon in Provo, Utah, decided to truly put Bitcoin to the test. He lived entirely on Bitcoin for the first three months of his marriage and chronicled it in a documentary, Life on Bitcoin. Craig and wife Beccy were even prepared to risk their jobs if their employers refused to pay them in Bitcoin. That’s pretty bold! Could their experience be valid for big city folk in a fast-paced environment? If successful, will this lead to a larger Bitcoin following and increased usage?
Bitcoin is likely to enjoy more popularity as its underlying technology, blockchain, becomes commonplace in making US and global financial markets more efficient. In short,”it is digital gold,” says Overstock CEO Patrick Byrne, whose online retailer was one of the first to accept Bitcoin payments. I disagree. It may be better than gold. Why? It’s more liquid, handier, and has more upside potential – just in my humble opinion, of course. What do you think?
Opinions are the writer’s own. Furthermore, the information in this article does not constitute investment advice.