Is Bitcoin truly the new form of gold?

In the world of finance, two assets have captured the attention of investors and speculators alike: Bitcoin and gold. Both have unique qualities that set them apart, yet they share some similarities that make for an interesting comparison.

Bitcoin and gold, in their own ways, offer a degree of anonymity in acquisition. While gold has been a trusted store of value for thousands of years, Bitcoin, introduced in 2008 by Satoshi Nakamoto, is a relatively new player on the scene.

One key difference between the two is their market size. The Bitcoin market is much smaller, contributing to its high price volatility. On the other hand, gold, being a well-established asset, has a larger market, resulting in more stable price fluctuations, albeit not entirely immune to volatility.

The value of gold is primarily driven by demand for gold ETFs, such as the SPDR Gold Shares, the world's largest gold ETF, and Xetra-Gold in Germany. Bitcoin, on the other hand, is influenced by a variety of factors, including the decisions of influencers like Tesla CEO Elon Musk and Cathie Wood, as well as companies accepting Bitcoin as a means of payment.

Despite their anonymity, both Bitcoin and gold face environmental concerns due to their production. The history and trust in Bitcoin are still developing, which explains the enormous fluctuations in its price. Gold, on the other hand, is generally considered a long-term store of value, albeit with volatility.

Thomas Buckard, co-founder of MPF, a wealth management company established in 2000, has seen the evolution of these assets. Prior to his work at MPF, Buckard worked in private banking at Deutsche Bank. He is responsible for customer acquisition and support at MPF.

Investors approach gold differently depending on their location. American investors view gold as an asset class for generating returns, while investors in Germany or India tend to see it as a means of stability.

It's important to note that both Bitcoin and gold largely evade the influence of international central banks. However, the development of the gold price is not primarily influenced by the purchases of international central banks, unlike Bitcoin, which can be impacted by state restrictions, such as reports of China wanting to ban Bitcoin mining causing temporary price drops.

Bitcoin does not pay interest and incurs opportunity costs or gains due to negative interest rates, but this has only a marginal effect on its price. Gold, on the other hand, does not generate returns in the traditional sense but is valued for its role as a store of value.

In conclusion, while Bitcoin and gold share some similarities, their differences in market size, production, and historical trust make them unique investments. Understanding these differences can help investors make informed decisions when considering these assets as part of their portfolio.