Bitcoin has always been compared to gold. As time went by, the safe haven reputation of Bitcoin only strengthened. However, Bitcoin was conceived as an alternative cash system, and Bitcoin enthusiasts still greet businesses that have started accepting bitcoins. What are the chances that Bitcoin will eventually become a regular means of exchange?
Safe haven assets: Bitcoin and gold
Gold has been recognized as a safe haven for a long time, meaning that it successfully preserves value in times of financial turbulence, serving as a strong hedge against inflation. Bitcoin, sometimes referred to as digital gold, is something new in this regard. Multiple investors and financial experts went so far as to call Bitcoin a better version of gold.
Both assets are scarce and hard to produce. Gold is finite, and Bitcoin has a hard cap of 21 million, most of which is already in circulation and around three million are lost forever.
As for the advantages of Bitcoin over gold, cryptocurrency is extremely easy to manage. Gold bars need special storage. Maintenance of gold bars is demanding and costly. More than that, gold needs space. Bitcoin is much more comfortable as you may always have it with you as long as you obtain a seed phrase of your wallet or private and public keys. Bitcoin can be stored in a trustless manner. For gold, you will probably have to trust professionals. Sending gold is way harder and more expensive than sending a Bitcoin transaction.
Another characteristic that makes Bitcoin way different from gold is value dynamics. Bitcoin has an element of gambling to it, as its price is pretty volatile. However, as institutional investors and governments are joining the hunt for Bitcoin, the price stabilizes without losing its upward direction. Many say that this cycle will be different from the previous ones, meaning that major ups and downs of Bitcoin will probably become a thing of the past.
Gold has a long-term price appreciation, too, and does not have the volatility of Bitcoin. More than that, during the economic turmoil triggered by Donald Trump’s tariff policies, gold spiked immensely, not Bitcoin. It signals that investors trust gold more than Bitcoin.
One of the reasons behind gold’s strength is that its price doesn’t correlate with the stock market movements but rather grows slowly and intensifies when people expect hard times. Bitcoin is tied to stock prices more clearly. Finally, gold is familiar to most people and leans to more established regulations. Uncertainty in Bitcoin regulation is turning some of the potential investors away.
Bitcoin as a means of exchange
While some insist that Bitcoin is not good for payments but great as a savings currency, many in the crypto community argue that Bitcoin derives its value from being used as a means of exchange. In 2021, Tesla made a revolutionary step when it announced that its vehicles could be purchased for Bitcoin. However, soon after, the company withdrew its decision, citing the environmental impact of Bitcoin as the reason.
In the U.S., many big and small businesses accept Bitcoin. Notable examples are Apple, Microsoft, Starbucks, PayPal, Netflix, and many others.
However, despite various advantages, Bitcoin’s use as a means of exchange is limited by a relatively small share of merchants accepting BTC. According to Bitdegree, Bitcoin is accepted by 15,000 businesses around the world, of which over 2,000 are based in the U.S. On top of that, the network capacity of Bitcoin is too small for a means of exchange used by the masses. It can process only up to seven transactions per second. For comparison, Visa is capable of processing over 65,000 transactions per second. It is accepted in over 46 million merchant locations.
Nevertheless, the Bitcoin community was never going to get over it. For years, developers have been working on solutions to scale Bitcoin up for higher adoption as a means of exchange.
The most well-known project aimed at solving Bitcoin’s scalability issues is Lightning Network. LN is a layer-2 protocol that enables fast and cheap transactions using off-chain transactions for this purpose.
Surprisingly, even the name of the smallest denomination of Bitcoin became the battleground within the crypto community. Originally, the one hundred-millionth particle of Bitcoin was called Satoshi (or sats), after Satoshi Nakamoto, a mysterious creator of Bitcoin. A new proposal suggests that the name “bits” will fit better.
Prepaid crypto debit cards are moving Bitcoin spending forward. They allow clients to hold BTC right on the banking card and spend it anywhere where the cards are accepted. Bitcoins are turned into fiat money automatically and exchanged. As prepaid cryptocurrency cards continue to occur and more businesses jump on the Bitcoin train, BTC will become an easier choice as a means of exchange. However, its role as capital or savings money will persist.
