The total market capitalization of gold is estimated to be above $7 trillion, which is over 38 times that of bitcoin at the moment. However, there are those that think that the cryptocurrency is a better store of value for our age than the precious metal. The latest take on the idea explains how the upcoming halving fits into this.
Also Read: Will Bitcoin Crash or Double in Price After the Halving? Miners Have Their Say
Bitcoin to Rival Gold as a Store of Value
Bitcoin is set to rival gold as a store of value in the digital age argues Mike Co, over at the Coinbase Blog. According to his view, gold has been a historic store of value primarily because of its scarcity and that is something that the cryptocurrency can replicate. Moreover, while the precious metal is very rare, there is no way to undeniably verify the exact total gold supply, unlike with the digital asset. And scarcity is also baked right into code of bitcoin, with the software placing explicit limits on how much can be produced and when. This is done with deterministic methods such as a mandatory halving.
“If tomorrow, a very hypothetical asteroid the size of that gold box were to crash into the Earth, the value of gold would also crash,” explained Mike Co. “While gold is shiny and can be useful in electronics, so are other metals like copper. Yet copper is worth a tiny fraction of the value of gold.”
Bitcoin is also better than any precious metal can be in many ways. Benefits include its auditability, portability, and divisibility. Another feature he lists is the privacy of transactions, as BTC can be sent digitally and pseudonymously. Additionally, Mike Co mentions relatively low fees to send large sums in bitcoin internationally as there is no need for armored transport and guards as with gold.
“This past decade, Bitcoin’s value in gold has risen significantly amid surging global economic uncertainty. Gold, and bitcoin, are safe havens from fiat currency devaluation, which historically tends to be incited by surging government debt,” concluded Mike Co. “Armed with a myriad of technological advantages, accelerating development, and maturing global market, Bitcoin is a store of value to rival gold in the digital age.”
What Is the Bitcoin Halving?
Every time a new block is mined, those who facilitated it are rewarded with a set amount of coins. But once every 210,000 blocks this set reward amount is programmed to decrease by half, hence the name halving. This mechanism was created by Satoshi Nakamoto to ensure the current supply is limited, making coins more scarce as there will never be more than 21 million in circulation. It can also create upward pressure on the price in contrast to most fiat currencies that only lose value over time due to inflation.
The first-ever halving took place in 2012 when the block reward initially set to 50 coins fell to just 25. The second and last halving so far took place in 2016 when the block reward dropped from 25 to just 12.5 coins. The upcoming bitcoin cash and bitcoin SV halving events are expected to occur during April 2020. After this happens, BCH and BSV miners will lose half the current block reward (12.5 coins) and receive just 6.25 coins and fees per block mined. The BTC halving is expected not far after that in May 2020.
Do you think that any cryptocurrency will rival gold as a store of value in the digital age? Share your thoughts in the comments section below.
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