Bitcoin vs. Gold: Is Digital or Physical the Way?

Since Satoshi Nakamoto authored and released the white paper for Bitcoin back in 2009, the financial industry has been hurled into a ferocious debate as to whether this invention of the world’s first digital currency will ultimately usurp all other fiat currencies including the world reserve, the USD, or not. As this debate progressed, those in favour of Bitcoin started championing its early gains as the reason why Bitcoin was destine for $100,000+ per coin. Speculating that NOTHING could slow this train down.

It is hard to argue with a 17,000% gain over Bitcoin’s short 13-year lifetime, but to argue that it as an asset will replace tangible assets like silver and/or gold, may be pushing things too far too quickly. Silver and gold have historically been used as hedges against inflation and have always equated for central bank fiat currencies loss in purchasing power once markets have determined inflation has become entrenched. This not taking into account the industrial uses for these metals, specifically silver, that would add upward price pressure on precious metals that would not be there for Bitcoin. In addition to that, these assets are not used as speculation to create wealth during good times when liquidity is flowing into stocks and other riskier equities; which is exactly what was happening when Bitcoin performed so well. Bitcoin created massive wealth during a time between 2009 and 2020 when all other speculation assets like tech stocks and other crypto currencies were also soaring to all time highs because of easy money being allowed to flow into the system due to artificially low interest rates. However, this euphoria led the Bitcoin community to believe that due to Bitcoin’s world class strength during the easy times, that Bitcoin would replicate this performance once the current debt based financial system began to collapse, causing what was left of world fiat currencies’ purchasing power to evaporate.

Now that we are a year into what would be considered by most to be a global economic downturn, Bitcoin has been given a 12-month window to prove that it would protect its holders similar to silver and gold during a period of high inflation. Remember, Bitcoin was touted by many major names in finance, Michael Saylor being a main player, as the ONLY asset that would protect against the rages of inflation that were soon to come. Even near Bitcoin’s peak of $70,000 USD per coin, Michael Saylor told his followers to mortgage their house and buy Bitcoin. Since then, housing has begun a massive downturn, and Bitcoin has not performed EVEN CLOSE to how it was “supposed to” during an economic crisis.

So how have silver and gold compared during the economic chaos of the past year?

The above chart outlines the correlation between 1 BTC and 1 ounce of gold. As you can see, since inflation became elevated at the start of 2022, gold has been systematically chipping away at Bitcoin, actually gaining nearly 67% against Bitcoin in the past year moving this chart from near 28 BTC = 1 oz of gold to just over 9 BTC = 1oz of gold. During a time when both assets were given the opportunity to shine and protect their holders against inflation, it has been gold that has continued to shine brighter.

Similarly to the chart comparing 1 BTC to 1 ounce of gold, the above chart substitutes silver in gold’s place. As you can see, with silver even outperforming gold on the year, silver chipped away at Bitcoin’s dominance more so; bringing the ratio from 1 BTC = 2200.95oz of silver down to 1 BTC = 707.56oz of silver. This representing a near 68% change, once again showing that precious metals are far superior during times of economic chaos.

On the year, BTC is down 64.89%, and on the other hand, gold is up 6.41%, with silver being up 10.11% (CAD prices). It is clear which of the two asset classes has done a better job offsetting the current 6.8% inflation Canadians are facing. Gold equated for almost the entirety of inflation, silver equating for all plus some, while BTC has only added to the hardship their holder faces.

While Bitcoin fans can argue that the true potential of BTC will not be seen until full utilization within the monetary system has taken place – the same can be said for silver and gold that were demonetized in 1873 and 1971 respectively. This also coming on the backdrop of news that central banks are loading up on a record amount of gold, seemingly in preparation for the next monetary system that is on its way in.

If you want to end up on the right side of history with assets that have a proven track record for performing well during economic calamity, look no further than silver and gold. While they may not be the “new toy” that was just released, they have done the job right for nearly 5000 years and there are no signs suggesting this will not continue. Below you will find tubes of our 1oz Disney’s Aladdin Silver Coin out of the New Zealand Mint that comes with a limited mintage of only 30,000 coins. These are great to stack for you, or to even get kids started early as they stack coins with familiar imaging.