Why this billionaire investor says Bitcoin is crushing gold

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People are starting to choose Bitcoin over gold, aren’t they?

Galaxy Digital billionaire investor and CEO Mike Novogratz says Bitcoin (BTC) is a better store of value than gold. Speaking on the investment management company’s third quarter earnings call, Novogratz said gold was being crushed by Bitcoin.

When calling the results, Novogratz said gold had fallen short of people’s expectations in recent years. “If you had asked the gold bugs two years ago where the price of gold would be, given what has happened in monetary and fiscal conditions around the world, they would all have answered a lot more higher than here, $ 1,800, “he said.

Novogratz, a well-known crypto fan, believes it is because there has been a substitution from Bitcoin to gold. “I still think gold was probably an acceptable asset in this environment, but it just got crushed by Bitcoin,” he explained.

It seems that people are buying one of the newest currencies in the world instead of one of the oldest. Indeed, according to the Financial Times, gold is among the worst performing assets of 2021. In contrast, Bitcoin is up more than 60% since the start of the year, according to data from CoinMarketCap.

Why is Bitcoin replacing gold?

Many people see Bitcoin as a form of digital gold. The idea is that, like gold, Bitcoin acts as a good store of value. A store of value is any type of asset that will not lose value or deteriorate over time. For example, gold should be worth as much – or more – in 15 years as it is today.

Some say that Bitcoin does not function as a store of value, mainly due to its volatility. But Novogratz does not agree. In fact, he says that the fact that more than 200 million people participate in the Bitcoin ecosystem means that the question is not even up for debate anymore.

“A store of value derives its value from the social construct that people agree that it has value – that I’m going to keep my hard-earned money, my job, my savings in that form,” he explained. .

It is true that Bitcoin has big advantages over gold. It’s a lot easier to move and a lot cheaper to store. It’s not perfect, but – unlike gold – it can be used as a form of payment.

Like gold, Bitcoin’s supply is limited, as only 21 million BTC will be produced. Amid growing inflationary concerns, there is an attraction to assets that could hold their value.

Why investors should remain cautious

Bitcoin certainly has some advantages over gold. But if you’re looking for a safe haven for your money, Bitcoin doesn’t tick all the boxes just yet.

For starters, Bitcoin is still a volatile asset – ideally, a store of value should retain its value even during a financial crisis. And Bitcoin hasn’t been around long enough for us to know if that will happen.

Bitcoin is currently down 30% from its peak six weeks ago, and these kinds of swings are not unusual. It is true that Bitcoin has gained in value this year, but it is still a risky investment.

A big risk is the potential impact of strict cryptocurrency regulation around the world. We know that more regulation is on the horizon, it is just not clear what form it will take. It doesn’t appear that the United States or European countries are banning Bitcoin like China has done, but heavy restrictions could be a blow to the crypto market as a whole.

That said, some form of additional regulation would mean more investor protection and could build confidence in the long run. SEC Chairman Gary Gensler has called crypto “the Wild West” – and not without reason. There are a multitude of scams and other types of crypto fraud; for every article of a crypto millionaire, you will find more stories of reckless investors who lost their money.

We mentioned that Bitcoin is cheaper to store and easier to move than gold. But the other side of this argument is that cryptocurrency platforms can be hacked. Bitcoin is easier to steal than gold – and stolen coins are very difficult to recover.

You can own bitcoin and gold

You don’t have to choose between Bitcoin and Gold, you can own both. Both assets can play a role in a diversified portfolio, as long as you understand the risks involved. Diversification is a great way to minimize overall risk, especially if you’re not investing the money you need for other financial goals.

If you want to include Bitcoin in your wallet, you can buy it from any cryptocurrency exchange. Don’t let the talk of digital gold blind you to the potential risks.

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