Bitcoin [BTC] is an emerging asset class. While crypto-enthusiasts continue to criticize its technical prowess compared to the newer cryptocurrencies, Bitcoin is highly efficient to Gold – the number one ‘safe haven.‘
Both Bitcoin and gold make a good store of value due to their limited supply. While Gold has 1000 years of history behind it, Bitcoin has also gained importance its alternative in the past ten years.
Moreover, due to the digital nature of Bitcoin, it is far more convenient and cost-efficient. Recently. Nic Carter and Willy Woo estimated one aspect of Bitcoin’s intrinsic value debate – the cost of production and verifications. According to Woo’s estimate based on Coinmetrics data, the average fees paid for Bitcoin transactions over the years is just 0.0005%.
According to Coinmetrics data, the total amount of value moved in Bitcoin has surpassed $2 trillion. Furthermore, the cost of mining (electricity, equipment, maintenance, etc.) is around $14 billion. Willy Woo, crypto-analyst and trader, tweeted,
Economic metrics of Bitcoin, paraphrased:
– The current valuation of all coins: $182b
– Amount paid by the current holders: $100b
– Cost to bring these coins into existence: $14b
– Fees paid to move coins between holders: $1b
– Value transmitted by the network between holders: $2.0T
The estimates also suggest that the average investor has made about 82% profit on Bitcoin in the past ten years. Nevertheless, the volatility in the price over the years would find a varying response to that estimate.
Moreover, it also counters the criticism around Bitcoin’s intrinsic value. The economics of Bitcoin indicates that Bitcoin is indeed backed in the same way gold is. Moreover, Bitcoin is one step ahead of gold due to its low transaction fees. Nic Carter, the co-founder of Coinmetrics noted,
The high cost of verification leads to emergent outcomes, like gold being circulated in walled gardens (like the LBMA) or gold being easy to confiscate (exec. order 6102), or gold ending up in central banks. Cost of verification is everything.
On the other hand, the reduced cost of verification with Bitcoin makes it a useful ‘individual’ store of value. Gold is a long history and geopolitical existence; gold mines exist in specific areas only. Its density is also significant, which makes it difficult to carry in large amounts. Hence, it needs a lot of security, and large institutions end up managing it.
Moreover, with Bitcoin, a full node can be maintained for about $10/month. This contributes to the verification of the integrity of the transactions. Carter noted that “Gold is far costlier and more cumbersome to verify.”
Do you think Bitcoin is a better store of value that Gold? Please share your views with us.