Some might argue that Bitcoin is the new digital gold, while others might say that it’s just a fleeting trend in finance and technology. Regardless of what you think about Bitcoin, there’s no denying that it has been making news lately. This article goes over why Bitcoin is being considered the new digital gold, and how it will help the general public.
Ease of transactions
One of Bitcoin’s most exciting features is how easy it makes transactions. A Bitcoin transaction takes place every 2.5 minutes on average—and can be as small as one Satoshi (0.00000001 BTC), which makes for very cheap transactions (at least for now). When you transfer $100 to someone in another country that usually costs around 10% or more of your total transaction amount. But when you pay with Bitcoin, everything from setting up your wallet to sending money only costs about 1% or less of your total transaction value—which means you’re saving thousands of dollars each year on transfers alone!
Bitcoin as legal tender for countries with a weak currency
I’m thinking Venezuela or Zimbabwe, but there are others. If a country’s currency is in such bad shape that it can’t even buy its own money back (due to inflation), then perhaps Bitcoin will be viewed as a safer harbour. Sure, it might fluctuate more than your local currency, but if people view it as more stable than their own, then it may make sense for them to keep their savings in Bitcoin. And if you’re trying to get out of a crisis-stricken country and need someplace safe to park your money—like cash—Bitcoin could be a way out. Even if people don’t keep it long term, they could have short-term protection against inflation with Bitcoin.
Bitcoin limited quantity
Bitcoin has a fixed supply of 21 million, meaning that once all are mined, there will be no more. This stands in contrast to fiat currencies like USD and EUR. The total number of Federal Reserve notes in circulation has increased from about 8 billion in 1913 to more than 4 trillion today. Although over 100 countries have their currencies, most are tied to fiat money through international agreements. As central banks create more money, purchasing power decreases and it becomes harder for people with lower incomes to save money.
Bitcoin for retirement account
Bitcoin has been on a tear in recent years, with prices more than doubling in 2016. Although it’s not clear whether Bitcoin will continue to see such rapid growth, it may be an attractive option for retirement account investors looking for an alternative to gold and other hard assets.
To determine whether Bitcoin or gold make better investments, there are three factors to consider: market volatility, security and liquidity. All else being equal, an investor may be better off going with Bitcoin over gold as long as he or she can stomach higher volatility in exchange for higher potential returns and liquidity that can’t be found with gold. However, investors should always keep their expectations realistic when investing long-term capital into volatile markets.
The major benefit of Bitcoin for retirement accounts is liquidity. Unlike gold or other hard assets, Bitcoin can be easily traded into cash whenever investors want. According to some estimates, there’s as much as $150 billion of investor money in idle retirement accounts that could potentially be tapped for trading purposes, and what better way to get at it than with a high-growth asset like Bitcoin?
Conclusion
Like physical gold, Bitcoin has a finite supply. It will never be printed like dollars and euros to infinity. While governments can ban its use or existence in their countries, they cannot stop you from using it any more than they can prevent you from holding physical gold or silver in your possession. Countries like Japan have started to recognize Bitcoin as a legal payment method and American lawmakers are slowly following suit by classifying Bitcoin not as a currency but as property—which means you’ll pay capital gains tax when you sell your digital gold for fiat currency (dollars, pounds, yen). So while Bitcoin may not be used at your local coffee shop just yet, it might be used someday—and that makes it well worth investing in today.
