Why Experts Are Calling Bitcoin Digital Gold — and What It Means for Investors
Written by
Dawn Allcot
Edited by
Amber Barkley
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Crypto-savvy investors often liken bitcoin to “digital gold.” Although bitcoin hasn’t yet caught on widely as a form of currency, investors are seeing it as a store of value, a hedge against inflation and an asset that’s expected to continue increasing in value over the long term.
“Bitcoin’s journey from a medium of exchange to a store of value closely mirrors gold’s historical role, earning it the nickname ‘digital gold.’ Its scarcity and fixed supply have become key drivers and motivation for investors to hold it as a store of value,” explained Charles Wayn, co-founder of web3 infrastructure and digital credential network Galxe.
Here’s a deeper dive into the similarities, with insight from crypto experts.
Why Has Bitcoin Emerged as a Store of Value?
Gold was introduced as a form of currency around 550 B.C., according to Gold.org. Yet, gold tends to be heavy, bulky and difficult to trade. In the 1830s, the U.S. began linking gold with cash on a de facto basis.
In the 1900s, the U.S. legally adopted the “gold standard,” where cash represented gold stores. The U.S. Federal Reserve was required to hold gold equal to 40% of the value of the currency — that is, U.S. dollars, according to Federal Reserve History.
Eventually, the U.S. moved to fiat money, where cash was no longer backed by gold in the nation’s vaults. However, gold holds inherent value for investors.
Likewise, bitcoin was introduced as a form of alternate currency.
“Originally designed to replace fiat currency and eliminate intermediaries, bitcoin’s retail utility has not kept pace with its broader adoption,” Wayn said.
Instead, the advantages bitcoin offers as an investment, very similar to gold, has caused its value to skyrocket.
“Bitcoin is often likened to gold, because both assets share characteristics that make them valuable in times of uncertainty,” said Felix Xu, co-founder of Bella Protocol.
Scarcity
Part of bitcoin’s value stems from its limited availability.
“Like gold, bitcoin is scarce,” said CK Zheng, co-founder and CIO of ZX Squared Capital. “Unlike a fiat currency, which a central government can print on an unlimited basis, bitcoin is a decentralized cryptocurrency.”
He explained, “The total number of bitcoins which can be theoretically mined is capped at 21 million by design. Additionally, the bitcoin halving process makes the bitcoin mining cost double every four years, assuming everything else [is] equal.”
A Hedge Against Inflation
Bitcoin’s scarcity makes it less susceptible to inflationary pressures.
The fixed supply means “its value won’t be diluted by inflationary pressures like traditional fiat currencies,” Xu said. “Bitcoin’s track record of surviving market cycles, regulatory challenges and scalability debates has only reinforced its status as the ultimate store of value in the digital age.”
A Decentralized Resource
Bitcoin’s decentralized nature keeps it free of control from a single entity, which means it faces fewer risks of devaluation from geopolitical instability.
“Bitcoin’s decentralized nature mirrors gold’s role as a hedge against centralized financial systems and government interventions,” Xu explained. “As a result, both have become trusted places for investors to park their wealth, especially when traditional markets are shaky.”
Built on Trust
Even understanding bitcoin’s value as a hedge against traditional finance, it’s important to understand the potential risks and drawbacks.
“Bitcoin’s status as a store of value hinges on more than just its limited supply — it’s built on trust. Like the dollar, bitcoin’s value depends on society’s belief in it, and if that trust were to disappear, so would its worth,” Wayn pointed out.
Security
Bitcoin’s security, initially a concern for investors, has been proven over the years.
Wayn said, “Blockchain technology provides robust security and transparency and can seamlessly cross borders.”
Xu added, “Bitcoin has over a decade of proven security. With the largest network of miners and nodes, bitcoin is a fortress compared to most altcoins. It’s faced all kinds of challenges and still stands strong.”
Lower Volatility Than Alt-Coins
Experts acknowledge that crypto is not considered a safe or “low-risk” investment, but it fares better than many other assets.
“All investments carry risk and volatility, particularly in an emerging asset class like bitcoin,” Wayn said. “Over the past year, clearer regulatory frameworks and institutional adoption have improved trust and protections for users. Additionally, bitcoin’s decentralized network, scarcity and increasing acceptance as a legitimate asset contribute to its appeal.”
Zheng agreed. “Even though bitcoin is still in the early adoption stage, its status as the ‘digital gold’ is growing rapidly without any competition. Its unique first-mover advantage in the crypto ecosystem with a global enthusiastic user base makes bitcoin relatively safer and less volatile compared to alt-coins.”
More From GOBankingRates
