Bitcoin Will Never Replace Gold

Bitcoin won’t replace gold. It is, however, a significant new asset class, and you can get exposure to it through HIVE Blockchain Technologies (TSXV:HIVE) stock.

| More on:

Lately, it’s been hard not to notice all the gains Bitcoin has been making. Up more than 150% this year, it’s really been on a roll. Just recently, BTC set a record high, trading at over C$30,000 at one point. As of this writing it was worth $29,000–down a bit, but still higher than at any point during the legendary 2017 bull run.

All of this renewed interest in Bitcoin has some wondering whether the cryptocurrency will replace gold. In a recent CNBC interview, Tyler and Cameron Winklevoss said that BTC would soar to $500,000. The two brothers have long championed Bitcoin, believing that it will surpass gold as a store of value.

It’s an interesting theory. Unfortunately, it’s unlikely to be true. As you’ll see in this article, gold’s uses are completely different from Bitcoin’s, making the two asset classes non-interchangeable. Additionally, precious metals, when used as currencies, serve a different purpose than cryptocurrency. While Bitcoin may eventually reach a market cap comparable to gold’s, it won’t fully replace it. The following are the two main reasons why.

Gold’s use cases are completely different from Bitcoin’s

One big difference between gold and bitcoin is how they are used. Gold is used mainly for three purposes:

  • As a store of value
  • Jewelry
  • Manufacturing (e.g., electronics)

Bitcoin, by contrast, is only used as a store of value and as a medium of exchange for digital transactions. It overlaps with gold on one use case only, but not for the other two.

Bitcoin isn’t useful in a disaster scenario

One big reason Bitcoin won’t replace gold is because it’s not useful in a major disaster scenario that knocks out electricity. In the event of a financial system collapse, or a war, people could use gold to barter for goods and services. Without a working electrical grid, Bitcoin would not be able to be used for this purpose.

A big reason people get into gold is because it could be used as a currency after a major catastrophe wiped out modern civilization as we know it. The same can’t be said of Bitcoin, which depends on all of the infrastructure of the modern age in order to exist.

A way to get Bitcoin exposure

Despite all of the points raised in this article, many experts believe you should get some Bitcoin in your portfolio. It is a new, emerging asset class after all, and it is being taken seriously by major financial institutions.

One way you could get BTC exposure is through a crypto stock like HIVE Blockchain Technologies (TSXV:HIVE). HIVE is a crypto miner that mines BTC, ETH and other cryptos in climate controlled data centres. The company puts its servers in regions with naturally low temperatures, reducing cooling costs, which helps HIVE increase its profit margins on its crypto mining operations.

This year, HIVE has been experiencing major growth. It generated $1.8 million in earnings in the first quarter, and $9.2 million in the second. This is largely due to the rapid appreciation seen in the price of BTC this year. The higher Bitcoin soars, the better HIVE does, so it should come as no surprise that HIVE stock is up more than 1,000% in the market this year.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Button has no position in any of the stocks mentioned.

More on Tech Stocks

Nurse talks with a teenager about medication
Tech Stocks

Shares of WELL Health Just Zoomed. Is It a Buy?

Given its improving financials and healthy growth prospects, WELL Health could deliver superior returns over the next three years.

Read more »

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies
Tech Stocks

3 Artificial Intelligence (AI) Stocks to Buy With $1,000 and Hold for Decades

Three TSX stocks are excellent choices for Canadians looking for exposure to significant AI players.

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Dividend Stocks

Where Will OpenText Stock Be in 1 Year?

OpenText (TSX:OTEX) stock's uncertain future: AI potential versus stagnant growth over the next 12 months

Read more »

Abstract Human Skull representing AI
Tech Stocks

Is Lightspeed Commerce a Buy After Q2 Earnings?

Given its healthy growth prospects, improving profitability, and reasonable valuation, I expect Lightspeed's uptrend to continue.

Read more »

GettyImages-three smiling investors_using tablet
Tech Stocks

2 Reasons to Buy Nvidia Before Nov. 20 and 1 Reason to Wait

This top AI stock has soared nearly 200% this year.

Read more »

A man smiles while playing a video game.
Tech Stocks

A Few Years From Now, You’ll Wish You Bought This Undervalued Stock

A dividend-paying but undervalued tech stock is a buying opportunity for both income and growth investors.

Read more »

An investor uses a tablet
Tech Stocks

3 Reasons Shopify Stock Could Hit its All-Time High Again in 2025

Down over 30% from all-time highs, Shopify is a TSX tech stock that trades at a compelling multiple in November…

Read more »

GettyImages-1352607170 (1)
Tech Stocks

Why Shopify Stock Is Skyrocketing Today

Shopify published its Q3 report this morning, and it gave investors plenty to be excited about.

Read more »