Volatility is one of Bitcoins most talked about characteristics, however, proponents maintain that the most capitalised cryptocurrency has potential as a store of value. For those who managed to stomach the roller coaster ride, the past 12 years show that Bitcoin has been a better hedge against inflation than gold and other safe haven assets.
Inflation, the invisible thief that steals the value of your savings and future buying power – is a measurement of the rate at which money loses value over time and it’s been on the minds of many in recent times. To avoid erosion of your savings, many advise hedging into assets like gold – which is the go-to barrier against these inevitable losses.
However, as time passed, it seems that a newcomer has come to challenge gold’s relevance as a store of value – in many instances being referred to as a digital equivalent of the yellow metal. Since Bitcoin’s inception in 2009, the bumpy ride seems to have yielded greater returns than gold and the S&P 500 – for those who aren’t shy of volatility.
Running The Numbers
Since 2009, the US dollar is estimated to have lost around 25.48% of its buying power. This means that $100 in 2009 had purchasing power that is equivalent to $125.48 today. The dollar’s buying power depreciated at an average of 1.91% over the past 12 years, however, the inflation rate for 2020/2021 currently hovers around 4%.
Gold, on the other hand, seems to have had a better run over since 2009. The yellow metal opened that year at a price of $869.75 to reach a high of 1,954.40 thus far in 2021. In this instance, $100 worth of gold would have more than doubled in value over the past 12 years – while the same amount sitting in savings would have bought a lot less.
It goes without saying that Bitcoin, in a relatively short time in existence, has outperformed pretty much every other asset. Since its birth in 2009, BTC has gone from literally $0 to around $37,780 at the time of writing. This cearly eclipses the performance of any other so-called safe haven assets.
Both Bitcoin and gold have done exactly what their respective camps have touted about them – they have increased in value, while fiat currencies have lost theirs. However, Ine has clearly done a better job than the other. The choice of which to get depends on how much volatility an investor is willing to put up with.