Gold

Bitcoin vs bank: Nayib Bukele reminds Peter Schiff why banks can’t trump BTC

Peter Schiff’s bank closure highlights why Bitcoin is crucial for financial freedom, as the nascent asset class has already helped nearly 4 million unbanked in El Salvador to gain banking facilities.

Since the closure of his bank in Puerto Rico, Peter Schiff has been at the receiving end of Bitcoin (BTC) proponents, reminding him this wouldn’t have happened if he was using BTC.

The latest to taunt the gold proponent is none other than El Salvador President Nayib Bukele, who has had a fair share of interactions with Schiff ever since El Salvador adopted BTC as a legal tender last year.

Bukele responded to one of the tweets made by Schiff in January this year criticizing BTC and predicting that the likes of MicroStrategy CEO Michael Saylor and Bukele himself would eventually have to sell their BTC holdings as price drops. The President responded to the tweet by asking about his bank.

The exchange between the two critics comes when the global financial markets are in ruins. On the one hand, the crypto market has lost more than 60% of its market cap from the top, and on the other, the equity market is at an all-time low.

Schiff has been quite vocal about his bank closure and has blamed the corrupt local government for it. He has said that the government is illegally trying to extort him for criticizing them.

While Schiff claims the bank was closed due to his criticism of the government, it highlights how centralized financial institutions such as banks often curtail financial freedom. The price of BTC might fluctuate over time, but the owner is in full control of their funds if they haven’t put them on a centralized exchange.

Related: Deutsche Bank analysts see Bitcoin recovering to $28K by December

Critics often highlight the volatility in the crypto market. Still, the traditional financial market is in no better state either, with inflation touching decade highs and several top stocks registering more significant losses than BTC in 2022.

BTC has been crucial in offering financial freedom to nearly 70% of the unbanked population of El Salvador. Although the price of BTC has dipped more than 60% from its top and critics often like to point out the decline in the number of BTC purchases by the Central American nation, the country has onboarded 4 million unbanked using their national Bitcoin wallet.

El Salvador’s remittance network has been enhanced by the BTC adoption, accounting for millions in cross-border transactions with minimal fees. The country has proven that Bitcoin can offer financial freedom to the unbanked.

5 reasons why Bitcoin could be a better long-term investment than gold

Crypto advocates often refer to Bitcoin as “digital gold,” but how does BTC stack up against gold as a long-term investment?

The emergence of forty-year high inflation readings and the increasingly dire-looking global economy has prompted many financial analysts to recommend investing in gold to protect against volatility and a possible decline in the value of the United States dollar. 

For years, crypto traders have referred to Bitcoin (BTC) as “digital gold,” but is it actually a better investment than gold? Let’s take a look at some of the conventional arguments investors cite when praising gold as an investment and why Bitcoin might be an even better long-term option.

Value retention

One of the most common reasons to buy both gold and Bitcoin is that they have a history of holding their value through times of economic uncertainty.

This fact has been well documented, and there’s no denying that gold has offered some of the best wealth protection historically, but it doesn’t always maintain value. The chart below shows that gold traders have also been subject to long bouts of price declines.

Gold price. Source: TradingView

For example, a person who bought gold in September of 2011 would have had to wait until July 2020 to get back in the green, and if they continued to hold, they would once again be near even or underwater.

In the history of Bitcoin, it has never taken more than three to four years for its price to regain and surpass its all-time high, suggesting that on a long-term timeline, BTC could be a better store of value.

Could Bitcoin be a better inflation hedge?

Gold has historically been seen as a good hedge against inflation because its price tended to rise alongside increases in the cost of living.

But, a closer look at the chart for gold compared with Bitcoin shows that while gold has seen a modest gain of 21.84% over the past two years, the price of Bitcoin has increased 311%.

Gold vs. BTC/USDT 1-day chart. Source: TradingView

In a world where the overall cost of living is rising faster than most people can handle, holding an asset that can outpace the rising inflation actually helps increase wealth rather than maintain it.

While the volatility and price declines in 2022 have been painful, Bitcoin has still provided significantly more upside to investors with a multi-year time horizon.

Bitcoin could mirror gold during geopolitical uncertainty

Often called the “crisis commodity,” gold is well-known to hold its value during times of geopolitical uncertainty as people have been known to invest in gold when world tensions rise.

Unfortunately for people located in conflict zones or other areas subject to instability, carrying valuable objects is a risky proposition, with people being subject to asset seizures and theft.

Bitcoin offers a more secure option for people in this situation because they can memorize a seed phrase and travel without fear of losing their funds. Once they reach their destination, they can reconstitute their wallet and have access to their wealth.

The digital nature of Bitcoin and the availability of multiple decentralized marketplaces and peer-to-peer exchanges like LocalBitcoins provides a greater opportunity to acquire Bitcoin.

The dollar keeps losing value

The U.S. dollar has been strong in recent months, but that is not always the case. During periods where the dollar’s value falls against other currencies, investors have been known to flock to gold and Bitcoin.

If various countries continue to move away from being U.S. dollar centric in favor of a more multipolar approach, there could be a significant amount of flight out of the dollar but those funds won’t go into weaker currencies.

While gold has been the go-to asset for millennia, it’s not widely used or accepted in our modern digital society and most people in younger generations have never even seen a gold coin in person.

For these cohorts, Bitcoin represents a more familiar option that can integrate into people’s digitally-infused lifestyles, and it doesn’t require extra security or physical storage.

Related: Argentines turn to Bitcoin amid inflation worries: Report

Bitcoin is scare and deflationary

Many investors and financial experts point to scarcity and supply constraints for gold following years of declining production as a reason gold is a good investment.

It can take five to ten years for a new mine to reach production, meaning rapid increases in supply are unlikely and central banks significantly slowed their rate of selling gold in 2008.

That being said, it is estimated that there is still more than 50,000 metric tons of gold in the ground, which miners would happily focus on extracting in the event of a significant price increase.

On the other hand, Bitcoin has a fixed supply of 21 million BTC that will ever be produced, and its issuance is happening at a known rate. The public nature of the Bitcoin blockchain allows for the location of every Bitcoin to be known and verified.

There’s no way to ever really locate and validate all of the gold stores on this planet, meaning its true supply will never really be known. Because of this, Bitcoin wins the scarcity debate, hands down, and it is the hardest form of money created by humankind to date.

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The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.