Gold investment yields significant returns. But cryptocurrency such as Bitcoin has recently proved to yield excellent returns than gold. Many investors are now attracted to the crypto world despite the volatile nature of digital currencies. Bitcoin’s popularity has grown tremendously in the past decade. Both of these assets have both benefits and downsides.
Which assets should I invest in, gold or Bitcoin? The choice you make will depend on your investment goals. This article will make a wise verdict on which asset to fund.
Learn about Bitcoin
Bitcoin is an electronic peer-to-peer payment system that allows you to transact with another party without the involvement of a third party. It is now recognized as ‘digital gold’ by cryptocurrency enthusiasts who believe this famous coin will surpass traditional gold bullion.
Bitcoins popularity is booming because of the following two factors:
- It diversifies your portfolio
- With its fixed supply, it has a higher potential for long-term store of value than fiat currencies
Nevertheless, bitcoin mining uses a lot of energy. Companies such as Tesla are suspending it due to environmental concerns. In addition, investing in cryptocurrencies may be risky because of possible security breaches.
Learn about Gold
Over the years, gold has always been an excellent store of value. It is known to be a haven option for investment. The yellow metal is a tangible asset that your family can pass down to the next generation. Additionally, it is accessible to traders in a variety of economic situations.
Gold has an extraordinary value that you can rely on since central banks use its value to fuel economic growth. Unlike other currencies, gold is not highly volatile and is highly reliable. It also protects inflation. Further, its prices rise even amid political tensions.
According to Reuters, central banks have more than 35,000 metric tons of gold in store. The banks hold gold to expand their wealth.
The above benefits do not assure a hundred percent high value of gold. Gold’s prices may fluctuate, and the mining process has adverse effects on the environment—for example, air pollution and loss of biodiversity.
Comparison between gold and bitcoin
According to the majority of investors, investing in gold is a wise option. Bitcoin, though new to the market, has gained tremendous popularity attracting many investors. Let’s compare the two and see what each offers.
Transparency and safety
Gold has a robust system for trading, tracking, and weighing. This system makes it impossible to steal or duplicate the metal.
Bitcoin, on the other hand, has complex algorithms, decentralized systems, and encryptions. These features make it hard to corrupt bitcoin. However, when it comes to investing in bitcoin, you need to be very careful as there are still safety concerns. For instance, Mt.Gox lost $460 million worth of bitcoins that led to huge losses.
Rarity
Both bitcoin and gold are scarce resources. But bitcoin is rarer than gold due to its low total supply. Its supply is about 21 million tokens in the market. While gold is in short supply, the supply can eventually increase as you mine more from the ground.
Liquidity
Both assets have high liquidity. You can convert these assets into money without significant losses as reliable buyers and sellers in the market.
Volatility
The prices of bitcoin and other cryptocurrencies are highly unpredictable. They can fluctuate significantly within a short period. The scarce nature and lack of regulation of bitcoins are the significant contributors to their volatility. Gold is less volatile than bitcoin, which makes it a safer investment option.
Baseline value
Gold has a variety of uses. You can use it to make jewellery, manufacture electronics, dentistry applications, etc. Bitcoin has made blockchain technology experience actual application. Additionally, it helps you in banking at a low cost without access to traditional banking.
Form of payment
Bitcoin is the best form of payment when compared to gold. You can easily divide and transfer bitcoin. You can also trace bitcoin transactions on blockchain ledger technology. Additionally, some companies are accepting bitcoin as a legitimate method of payment. Dividing gold can be tricky due to issues such as purification and verification.
Between bitcoin and gold, which one is right for you?
The best way to reduce potential losses in investments is by diversifying. Both bitcoin and gold can help in risk mitigation. Bitcoin is a non-correlated asset which means it’s not fixed to the direct market. It is advisable to allocate a few bitcoin in your traditional account to achieve higher returns with low volatility.
Gold can keep your money safe through portfolio modification. It can also protect you from financial crises. This security makes gold a wise option for investment.
Unlike gold, investing in Bitcoin is riskier. Its instability and the decentralized system can result in severe losses. If you invest in bitcoin, you must be prepared to accept possible risks. Gold poses a few risks also, but you can wisely time your sale or purchase to protect yourself.
Nonetheless, you must be willing to accept changes if you choose to invest in bitcoin. The coin has a global reach, but it’s highly uncertain. For example, China’s crackdown on cryptocurrencies may attract other countries to take the same move.
Bottom line
Gold and Bitcoin are worth investments. It would be helpful to research to see the good and the wrong side before making investment decisions. Bitcoin is unregulated and may give you significant rewards, but its security is not certain. Gold is regulated with higher risk management. The yellow metal is a wise option to kickstart your investment journey. However, its returns are low.
Before making an investment decision on these two assets, it would be best if you weigh the merits of each and check whether they match your investment goals.
