Gold vs Bitcoin: Which is a better investment option?
In 2019, Analysts in the world of economics such as David Rosenberg, Chief Economist, and Strategist at Gluskin Sheffhave predicted a recession. After many years of the bull market, investors concerned about this possibility may abruptly begin looking for a way to shift their investments into more stable safe havens. The Covid-19 pandemic taught us many lessons about a number of aspects of life, but one of the most important lesson was about the need to have your savings and investments in order.
Gold
As we have experienced during the pandemic, people have flocked to safe-haven assets such as gold investments. Gold is an excellent safe-haven asset due to a number of considerations. It’s rare and valuable as a material for consumer items like jewelry and electronics and has nothing in common with assets like currencies and stock indices like the S&P 500.
You can buy gold from banks, brokers, exchanges, and even physical stores that sell physical gold for cash. The majority of regular exchanges allow initial investments starting around 5-10 ounces of gold ($1,740/ounce), but new exchanges allow smaller purchases, as low as just a few dollars. Over the last 5 years, gold recorded a 38% price increase.
Bitcoin
Launched in 2009, Bitcoin ushered in a new era of digital currencies. Investors have started looking at it as the future gold. It is purely decentralized and can’t be stolen. It is viewed as the most lucrative asset on the face of the earth. Bitcoin caught the public’s attention over the last few years and became the most popular investment.
Its value comes from different traits and fundamentals, but overall it’s valued primarily for its scarcity, censorship resistance, security, and ease of transaction. The return on investment is projected to be 80% and has proved to generate wealth for generations. It is generated by the collective computing power of “miners,” individuals, and pools of people working to verify transactions that take place on the Bitcoin network and are then rewarded for their time, computing power, and effort with bitcoins
Of all the assets, Bitcoin is the only one available for trading 24/7, all year long. You can buy BTC (Bitcoin) on cryptocurrency exchanges such as Binance.com, via P2P trading, bitcoin ATMs, vouchers, or a wide range of fiat gateways.
Comparison
Although it is riskier and not as pretty, Bitcoin is available for trading 24/7, unlike gold. Additionally, it is digital hence it transcends borders and is not controlled by a central entity or individual. Even with online scams and security breaches, Bitcoin can safely keep backups. From memory wallets, paper wallets, desktops among others, Bitcoin can take many forms, you have many options that don’t require the services of a third party unlike Gold.
Whilst both gold and Bitcoin are finite, gold above the ground stocks has been increasing by around 1.7% a year for the last 20 years. In contrast to this, Bitcoin stocks are currently increasing by around 3% per year. Furthermore, the cryptocurrency space has grown immensely in recent years, and there are now thousands of different types of cryptocurrencies, along with Bitcoin, available to purchase via various online platforms, and yet Gold is a scarce natural element.
Final Verdict
Precious yellow metal and bitcoins are two assets that are independent of the government. Both gold and cryptocurrencies are limited assets and hence prices of both of these assets appreciate or depreciate based on their demand and supply. In terms of rarity, both are rare and as far as liquidity is concerned, both are good.
The traditional move would be to hedge against stock volatility with gold. This has proven an effective method in the past but diminishing the shine of yellow metal, cryptocurrency has given even better returns than gold. And, that is why cryptocurrency is the new hot cake in terms of investment. It has become a newer alternative that is challenging the old-school safe-haven.
While gold has unmatched accessibility to people of all economic standing and technological knowledge, as a store of value, Bitcoin has outperformed gold by a factor of 100. The rest of the globe is catching up and is starting to reprice digital currency in real-time. Despite the fact that Bitcoin has increased by more than tenfold in the previous few months, it is expected to continue to appreciate US dollar terms in the next few years. By 2030, Bitcoin’s market capitalization may have surpassed that of gold.
As cryptos have been giving stellar returns amid uncertainty in regulations, there is still a debate going on whether gold would lose sheen in a race against bitcoins.