Bitcoin is often called digital gold. What conditions are needed for bitcoin to replace gold (digitally) or truly become its digital counterpart in cryptocurrency? What signals should be sent to the market that this process will begin soon or is already underway?
Calling bitcoin “digital gold” is unjustified and premature. In fact, there are many more differences than similarities between these two asset classes. At the moment, we don’t see any compelling arguments in favor of bitcoin being a digital version of gold.
At the same time, there are a number of key factors that do not allow bitcoin to functionally replace gold:
- High volatility of the bitcoin price
- Impossibility of physical use, unlike gold in the jewelry and electronics industries
- Insufficient protection against inflationary devaluation due to the speculative component
- Risk of bans and restrictions on its use by governments
- Lack of a centuries-old history of recognized value, as in the case of gold
- It no longer has absolute independence.
For bitcoin to truly become “digital gold”, a number of conditions should be met:
- Stabilization of prices and reduction of volatility
- Widespread use and acceptance throughout the world as a store of value
- Elimination of the dependence of its value on speculative demand
- Obtaining the status of legal tender and store of value
- Preventing miners from centralizing the network and changing the code.