While the veteran cryptocurrency is currently struggling to attack the all-time high of $73,000 again after a breathtaking rally, gold is known for its reliable increase in value. The popular precious metal records an average annual increase in value of 15 percent – and the trend is rising. But what do Bitcoin and gold have in common and why are these two assets among the most popular in 2024?
Because strong performance is not the only thing that Bitcoin and gold have in common. On the contrary, the two assets share a number of similarities that make them equally popular among investors. It is not for nothing that Bitcoin has been referred to as “digital gold” over the years.
First and foremost, the two assets move independently of any financial systems and governments. This makes them a popular investment for investors, especially in economically uncertain times. In times of economic weakness, inflation and the threat of war, investors are turning to alternative assets such as precious metals and cryptocurrencies.
This is precisely why they are viewed as potential stores of value. And this is not least due to the obvious limitations of the two assets. For one thing, there will never be more than 21 million Bitcoin in circulation. Once the last Bitcoin is mined in 2140, no more will be created. On the other hand, the precious metal gold does not reach its limits quite as quickly, but mining it will become more difficult or even unprofitable in the future. And that’s exactly what investors are betting on.
The Bitcoin Halving: Is Scarcity Causing Prices to Rise?
While gold has already largely disappeared from the earth’s surface and therefore has to be dug deeper and deeper, the “production” of Bitcoin works a little differently – namely through mining. Halving plays a major role in this context. But what does it exactly mean?
Let’s first take a step back: Bitcoins are created by distributing them to miners who provide computing power to the network. In this way, the miners ensure that the network runs securely and is constantly maintained. In return, they receive rewards in the form of so-called block rewards. When a block is successfully created, the block reward is distributed to the miner in the form of BTC. Now to the halving: every four years, the block reward is halved with each halving.
In concrete terms, this means that the number of Bitcoins that are generated through mining and thus put into circulation will be halved. Since the fourth halving on April 20, 2024, only 3,125 BTC are created with each block. Since the payout is minimized, the halving is usually a bullish event, which is often followed by an increase in the Bitcoin price. Not least because of this, investors and traders around the world are eagerly waiting to see how the price of Bitcoin and Co. will develop in the months after the halving.
Invest in cryptocurrencies like Bitcoin with BISON and participate in the price development of gold
Although both gold and Bitcoin are considered speculative assets that could promise increases in value, they do have some differences. Bitcoin is a payment network. Additionally, cryptocurrencies tend to experience greater market fluctuations than precious metals and tend to appeal to a more risk-tolerant audience.
However, diversification through Bitcoin and gold can help investors spread risk and minimize the impact of market fluctuations on the portfolio. Investors should consider investment objectives, risk tolerance and time horizon before investing in these asset classes.
As an established trading platform for cryptocurrencies powered by Boerse Stuttgart Group, BISON has recently started offering trading in raw materials and precious metals in the form of ETCs and ETNs, including EUWAX Gold. Some ETNs come with leverage. This means that you can bet on rising and falling prices for these assets through long and short selling. This means investors can profit in any market situation, even in a bear market.
Interested? Then start trading crypto and securities with BISON today.
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