Bitcoin: The Next Digital Gold?

A Trader’s Perspective on the Future of Cryptocurrency as a Store of Value

As someone who has been trading and holding Crypto since 2013, I have always been focused on the concept of research and overall data analysis for the past decade. The journey has been fascinating and I’ve had the lucky and unique privilege of watching Bitcoin evolve from a niche digital curiosity, into one of the most disruptive financial assets of the 21st century. In many ways, Bitcoin’s rise echoes the journey of gold—an asset that has long served as a store of value, a hedge against inflation, and a safe haven in times of economic uncertainty. But as Bitcoin grows in prominence, the question I often hear from both seasoned investors and newcomers is: Is Bitcoin the next digital gold? Maybe yes, maybe not? Let’s find out!

In the early days of crypto, the comparison between Bitcoin and gold seemed almost laughable. Bitcoin was new, volatile, and, to many, untested. Gold, on the other hand, had been a trusted store of value for millennia. But over the years, I’ve come to believe that Bitcoin does have the potential to be the "digital gold" of the future. However, this analogy comes with its own set of nuances, and whether Bitcoin can truly fulfil that role is far from a simple answer.

The Real Case for Bitcoin as Digital Gold

There’s no question that Bitcoin shares several key characteristics with gold, especially when viewed through the lens of scarcity and security.

1. Scarcity and Deflationary Nature: Gold has long been revered for its scarcity—there’s only so much of it in the world, and it can’t be conjured up out of thin air. The same can be said of Bitcoin. With its fixed supply cap of 21 million coins, Bitcoin offers a unique kind of scarcity that fiat currencies, which can be printed endlessly, simply don’t have. The unique aspect of it comes with its own advantage!

Did you know that, as of 2024, around 19.5 million of the 21 million total Bitcoin have already been mined, leaving just 1.5 million to be released over the coming decades. This fixed supply is a key reason why Bitcoin proponents argue that it is superior to traditional fiat currencies: which are subject to inflationary pressures due to the ability of central banks to print more money.

In fact, Bitcoin's scarcity is one of the main reasons prominent investors, such as Paul Tudor Jones, a well-known hedge fund manager, have voiced support for the cryptocurrency. He famously called Bitcoin "the best hedge against inflation" during a period of economic uncertainty when the Covid-19 year happened, he announced that he had allocated 1-2% of his portfolio to Bitcoin, citing its "limited supply" as a key feature that makes it "like gold." Cheers to the news!

2. Global Accessibility:? Let’s be realistic; unlike gold, which requires physical storage and transportation, Bitcoin exists purely in the digital realm. This makes it incredibly easy to access, transfer, and store. From my vantage point as CEO of a crypto investment platform, one of the most exciting aspects of Bitcoin is its ability to transcend borders. While gold can be cumbersome to move (and very expensive to insure), Bitcoin can be sent across the globe in seconds, without the need for intermediaries. In a world that is becoming increasingly globalised and interconnected, this feature alone is invaluable. No middleman, just you and the whole ecosystem leveraging its security and unchanged data!

In 2021, Fidelity Digital Assets (part of the financial giant Fidelity) wrote in a report that Bitcoin's ability to be transferred across borders "without intermediaries" is one of its key advantages over gold. It stated that Bitcoin’s unique "programmable" nature makes it an ideal asset for the modern, digital economy, where speed and security are paramount.

3. Institutional Interest and Recognition: The past few years have seen an increasing number of institutional investors move into the Bitcoin space. Companies like MicroStrategy have poured billions into Bitcoin, while financial giants like Fidelity are now offering crypto services to their clients. As more institutions begin to recognize Bitcoin as a legitimate asset class, it starts to resemble the role that gold has played in portfolios for decades. Bitcoin is quickly evolving from being a speculative asset to a serious investment option.

Just this year alone, MicroStrategy, led by CEO Michael Saylor, has accumulated over 150,000 Bitcoin, valued at over $4.5 billion. Saylor has been an outspoken advocate for Bitcoin as a store of value and has likened the asset to "digital gold." He views Bitcoin as a superior alternative to holding cash, due to its deflationary characteristics. So, what does it means for the future of coins? Gold 2.0!

We even have financial institutions like Goldman Sachs, Fidelity, and BlackRock have all either started offering Bitcoin-related products or signaled their intention to do so in the near future. For instance, BlackRock, the world’s largest asset manager, filed with the U.S. Securities and Exchange Commission (SEC) for a Bitcoin ETF in 2023, followed by approval from the SEC, highlighting the top institutional players' belief in Bitcoin's long-term potential as a store of value.

The Challenges: Is Bitcoin Ready for Prime Time?

As much as I believe in Bitcoin’s long-term potential, there are very real challenges that prevent it from fully taking on the mantle of "digital gold" just yet. As a huge advocate in the space, I feel these obstacles acutely, and they shape the way we build and adapt our platform to meet the evolving needs of our users.

1. Volatility: One of the biggest hurdles Bitcoin must overcome is its volatility. In my years in the crypto industry, I’ve seen Bitcoin experience swings that would make even the most seasoned gold investors nervous and cautious in their investments. A 10% price movement in a single day is not uncommon in the Bitcoin market, whereas gold’s value tends to move much more slowly and predictably. While Bitcoin’s volatility creates opportunities for traders, it’s a double-edged sword for those seeking stability.

In 2023, Bitcoin’s price fluctuated by over 50% in some months, a level of volatility that is unheard of, in the gold market. In contrast, gold typically experiences annual price swings of 5-10% on average.

Warren Buffett, one of the world’s most respected investors, has long been skeptical of Bitcoin due to its volatility. In 2020, he famously referred to Bitcoin as "rat poison squared" and warned that it would not hold long-term value as a store of wealth. Though he acknowledges gold’s role in portfolios, he remains unconvinced by Bitcoin’s ability to offer stability in the same way.

For Bitcoin to become a true "store of value" akin to gold, it will need to mature and stabilize. This is not to say it’s impossible—Bitcoin’s history of dramatic booms and busts could ultimately lead to greater maturity as the market matures, liquidity increases, and volatility moderates. I put your belief in the future of it!

2. Regulation and Uncertainty: Another challenge is the regulatory environment. In the early days of Bitcoin, the lack of regulation was part of its appeal—it was too free from the control of governments and central banks. But as Bitcoin has gained traction, so too has the attention of regulators. They started paying attention. Countries around the world are still figuring out how to treat Bitcoin, and the regulatory framework remains fragmented. So, will Bitcoin be classified as a commodity, a currency, or an asset? And what impact will future regulations have on its price? You can try to solve the math.

Gary Gensler, Chairman of the U.S. Securities and Exchange Commission (SEC), has made it clear that Bitcoin, while not considered a security, could still face more regulatory scrutiny in the future. In a 2021 interview, Gensler stated that "We just need clarity on how to protect investors and how to ensure that the markets are not manipulated."

3. Technology and Adoption: Bitcoin has made huge strides in terms of technological development, but there are still concerns around scalability, energy consumption, and transaction fees. Unlike gold, which is universally understood and can be traded in various forms across the world, Bitcoin’s infrastructure and adoption are still evolving. It is like a newborn baby learning how to even exist!

Jack Dorsey, the co-founder of Twitter and now CEO of Block (formerly Square), is a vocal advocate of Bitcoin, calling it "the native currency of the internet." Dorsey’s company, Block, has integrated Bitcoin into its products, further solidifying its potential for mainstream adoption. However, he also acknowledges that Bitcoin must overcome hurdles related to scalability and energy consumption before it can fulfil its potential as the digital equivalent of gold.

Is Bitcoin the Next Digital Gold? The Verdict!

So, let’s be realistic: is Bitcoin the next digital gold? From where I sit, I believe Bitcoin has the potential to fulfill that role, but it will take TIME. Like gold, it has the key characteristics that could make it a lasting store of value: scarcity, portability, and decentralization. But unlike gold, it is still a nascent, volatile asset that requires careful management and attention from investors.

As we continue to evolve in the crypto space, the question isn’t whether Bitcoin will become "digital gold", but rather how quickly it can overcome its current limitations and adapt to a rapidly changing financial landscape. As more institutions adopt it, as regulatory clarity improves, and as the technology matures, I believe Bitcoin has the potential to play a central role in the global financial system.

For now, it’s not quite there yet. But the journey is unfolding, and I am, excited to be part of it.