This $10 Quintillion Discovery Shows Why Bitcoin Is Better Than Gold

Precious metals are only rare when you confine your perspective to what's available on this planet at this moment in time

The odds of a space mining rig ever getting established and shipping ore back to Earth are incredibly remote and not worth pricing into any of your financial models

But even if none of that asteroid's metal ever lands on Earth, the mere possibility of it happening significantly undermines gold's claim to lasting scarcity in the big picture of things

There's no Bitcoin in space Earth-bound investors to think of gold as a finite store of value

It's cumbersome to mine more of the metal and requires a lot of capital investment

Flood the market with even a fraction of that supply, and the price of gold would collapse overnight

Asteroid mining on any commercial scale is decades away and would be wildly expensive -- and we don't yet know what 16 Psyche actually contains -- so gold's scarcity is still in play today and for the foreseeable future

Still, the thought experiment reminds us that gold's scarcity is geological and effort-constrained, not guaranteed as a result of any perty of the metal itself

Bitcoin's scarcity is different, and over the very long run, ly to get worse rather than better, meaning it should get more valuable over time

Un gold, no cosmic mother lode can dilute the coin's holders

The tocol's math is indifferent to new mining niques, imved refineries, better drills, or interplanetary miners

Image source: Getty Images

Three practical reasons for buying Bitcoin over gold A science fiction supply shock from asteroid mining is fun to ponder, but bably won't be realized in our lifetime

Investors need concrete portfolio logic to allocate their capital, so here are three reasons why Bitcoin is more deserving of their allocation than gold in today's economy

First, the asset is not always tightly correlated with the rest of the market and the economy during times of turbulence, and the cause of turbulence often affects the demand for commodities gold

For instance, instability in a country that houses a lot of gold mining companies might cause the price of gold to be highly unpredictable during a time that the market is otherwise tranquil, but that bably won't ever happen with Bitcoin because it isn't exposed to the same set of geography-related risks

Wobbled under the "Liberation Day" tariff fears this spring, Bitcoin rallied 15% while the wider market sagged, signaling its capacity to zig when equities zag, even if it isn't guaranteed

Second, the coin behaves more an inflation hedge in countries with weaker fiat currencies than in it does in developed economies

That dynamic could widen as more people face currency debasement and face the risk of capital controls, which are both blems gold historically mitigated

The difference is that it's much easier to transfer Bitcoin across borders, making it more attractive than physical gold

Finally, Bitcoin's supply curve generates significant upside, but gold's doesn't

Past halvings preceded multiyear bull runs

Meanwhile, volatility has tr lower with each cycle, offering the potential for a smoother ride to committed holders over the years

It might not ever be as easy (from an emotional perspective) of an asset to hold as gold, as its price will bably always be far more volatile than that of any precious metal, but it'll bably continue to outperform gold, too

So at least investors might get some compensation for the lost sleep

Still, none of this eliminates risk

Bitcoin can experience sharp swings in its value

But scarcity that can only intensify, that plus utility that grows with global adoption give it an investment thesis gold can't match

Short-term price action can be bad for holders, but over the long term, it has reliably rewarded those with patience and I predict the same for the future

Alex Carchidi has positions in Bitcoin

The Motley Fool has positions in and recommends Bitcoin

The Motley Fool has a disclosure policy.