āThe chief evils of speculation flow from the participation of the general public, who lack the special knowledge, and enter the market in a purely gambling spirit.ā
Irving Fisher, Nature of Capital and Income (1906)
Facebook.com was created in February 2004. 20 years later, the website has over 3 billion active users and rakes in $134 billion and $39 billion in profits1. Everyone and their grandmother had/has an account with the company (or Instagram or WhatsApp).
The Bitcoin white paper by Satoshi Nakamoto came out in 2008. Some claimed that Bitcoin will be the future. 16 years later, the number of active Bitcoin āusersā is a tiny fraction2 of Facebookās user base; it failed to go viral and reach mass adoption. Thatās because Bitcoin is slow, complicated, and expensive. Your grandmother is having a hard time setting up a crypto wallet. I wrote previously how Bitcoin will fail as a ācurrencyā3 or money, now I want to try to show how it will fail as a safe haven asset and compare it to another commodity that doesnāt pay any dividends: Gold.
At the time of writing4, the price of Bitcoin is $69,000 , average confirmation time is 70 minutes, ledger size is 520 GB, market cap $1.36 trillion
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Energy intensive
For Bitcoin to operate, just like any software on the cloud, it needs servers. These servers are called āminersā. These machines use up a lot of processing power; thatās why they need the latest computer chips and a lot of electricity. You cannot mine Bitcoin from your laptop or iPad. The cost (electricity + hardware) to mine 1 Bitcoin is ~$29,000 in 5 years. By then, the mining hardware will reach burnout (lifespan of 2 years only) and the bitcoin network will eventually get more complicated with time, requiring more computing power too. And all thatās before the famous āhalvingā event expected to happen this month where miners will get their rewards cut in half. Thatās why Bitcoin needs to go higher or else bitcoin miners will go bankrupt5.
In 10 years, after all 21 million Bitcoins have been mined, miners will get paid in transaction fees instead of bitcoin rewards, like efawateercom, and later on CliQ.
Now compared to Gold: the estimate energy use to mine 1 Bitcoin is 294 MWh. The estimate energy use to mine 1 kg of Gold is 80 MWh6. Comparing što š, Bitcoin (~4.25 kWh/1$) consumes 4x more energy than Gold (using these prices $69,000/BTC and $2,300/oz)
Thatās not the end of the story: after Gold is mined and refined, you can carry it around, transact with it, hide it, sell it later on, and you donāt need more energy. Unless you are a central bank who hides their gold reserves in a vault that requires constant surveillance or one of the Gulf countries that hides its reserves under the sea. Bitcoin on the other hand still requires the whole āminingā infrastructure and a lot of energy to keep the system running, or it collapses7.
==> Gold is more energy efficient than Bitcoin.
If you worked on a trading desk, you mustāve heard of volatility and standard deviation (Ļ) when pricing options. An asset class is volatile if the price moves a lot during a certain amount of time. If it is very volatile, it is considered high risk.
To keep it very short and simple (check this, this and this for more accurate analysis as the below calculation is only to give a rough idea), portfolio managers can get a good idea of the price range in the future:
Bitcoin Volatility today: 60% / Gold: 12% / US Cash: 0.22%
Price of Bitcoin in 1 year can range from +/- 1Ļ (33% confidence), meaning in April of 2025, the price range could be between $110,000 to $27,000 (or between $0 to $200,000 at 95% confidence). Gold will range from $2,020 to $2,576.
Which asset class, in your opinion, will pension funds and central banks consider to be less risky for the long term?
==> Bitcoin is too risky
Uses
Just as the newspaper š° has its itrinsic value, it also has additional/side uses: it can be used to clean windows or as a mat for your pet.
Gold is used by Central Banks around the world.8
Other than a āstore of valueā, Gold (chemical element 79, Au) is also used as: jewellery, in steaks š„©, and funnily enough in computer chips (used to mine bitcoin).
Gold has been used for millennia.
Bitcoin, unlike Gold, has no use other than speculation and gambling and has only been around for 16 years. It is still not widely used as money and already it is consuming more electricity than whole countries. I doubt we will ever see someone wearing a bitcoin chain around their necks or sprinkling bitcoin on their piece of meat.
==> Bitcoin is useless
Slow and steady wins the race (ŁŁ Ų§ŁŲ¹Ų¬ŁŲ© ŁŲÆŲ§Ł Ų©)
Bitcoin is slow (processing time), expensive (cost of electricity to mine), complicated (hash rate) and useless. Is Gold any better?
I think we should ask the 3rd founder of Apple, Ronald Wayne, what he thought of selling 10% of his stake in the company AAPL 0.00%ā in 1976 to buy gold instead. Even Vanguard founder John Bogle wouldnāt recommend more than 5% of your portfolio in Gold (or 10% as per gold bug doomsayer James Rickards).
If you are still curious about Bitcoin and want to invest in it9, can I suggest you buy at least 1/2 a Bitcoin and invest the remaining amount in farming projects, local charities, and/or small businesses in Jordan?
And to those crypto āexpertsā still betting theirs lives that Bitcoin will be the future, I put this hex on you šŖ¬:
68747470733A2F2F7777772E796F75747562652E636F6D2F77617463683F763D47484D6A44304C70354459
https://www.blockchain.com/explorer/charts/blocks-size
This debunks Bitcoinās claim to being decentralised. Gold is independent of any ācloudā infrastructure in order to work (except for some countries that keep their gold reserves at other custodian central banks)
Tips on investing in crypto: