Gold VS Bitcoin
Gold vs cryptocurrency: Which one should you buy and why? Bitcoin has gained acceptance as a store-of-value investment because, like gold, it tends to work as a hedge against currency devaluation and volatility, say crypto market watchers.
But is investing in the shiny precious metal more stable than putting your money into cryptocurrencies?
The first thing to note is that the price of bitcoin has grown exponentially. This continued rise in value means investors have seen spectacular returns on their initial investments. In contrast, gold hasn't fared nearly so well. That's not to say gold isn't doing well - just that its growth reflects an alternate trend among investors globally who are looking for safe places to put their cash outside traditional stock markets.
Bitcoin vs. gold: An apposite comparison?
In the last year, bitcoin's value has risen from between $2,500 to about $11,000 at its peak - an astonishing return of almost 800 percent in just 12 months. In contrast, an ounce of pure gold was worth about $1,251 a year ago and now trades around $1,250 - that translates into a slightly higher return than other financial investments over the past few months.
For most investors in any asset class (including cryptocurrency or precious metals), if you'd have bought and held for one year you'd more than likely be sitting on substantial returns right now. If this is your first foray into investing in cryptocurrencies or precious metals then congratulations - you've entered the world of high-risk, high-reward. If the fear of missing out (FOMO) grips you and you want to invest some money in bitcoin or gold, then here are a few tips to weigh up the pros and cons of each:
Bitcoin VS Gold: which is better as an investment?
Bitcoin has been around since 2009 - that's its unique selling point over any other asset class, including gold. There are 2.6 million bitcoins in circulation with a maximum possible number capped at 21 million coins. Miners use their computers to solve complex mathematical puzzles in order to mint new ones, with the total number growing at an ever decreasing rate as more bitcoins are mined.
In order to avoid inflation and devaluation of the currency, there's an upper limit on the number of bitcoins that can be introduced into the market at any one time. By contrast, there are more than 8 trillion ounces (around 12 billion kilos) of gold in existence today (although only about 2 percent is in circulation). However, unlike bitcoin, supply of gold is finite - and some believe this sets it apart from other assets like cryptocurrency. As recently as 2017 in fact, none was mined for the first time since World War Two. This shows supply/demand fundamentals do exist but historically haven't had much effect on price movements. One thing is certain though: In a dying world population where empty cupboards are the norm rather than the exception, gold will be in high demand.
Cryptocurrency stability
Bitcoin's volatility, or lack of it - similar to other cryptocurrencies such as ethereum and litecoin - is a stellar selling point for investors when compared to traditional assets like precious metals and stocks. BitCoin has an average daily variation of just 1 percent over a one year period according to Bloomberg data. That compares favorably with gold's daily price movements which are between 2-3 percent for one-year periods. Both bitcoin and gold have volatile market cycles but digital currency is more stable than its counterpart. In addition, there are many different types of cryptocurrency - although they share some similarities: They're borderless; they're encrypted; and the only way to buy them is via the internet.
Read more about gold vs bitcoin: What are the differences between these two assets?
Gold vs bitcoin: Which is easier to understand?
Bitcoin has captured global headlines in recent months as its meteoric rise has sparked fears of a bubble that will ultimately burst (much like 17th century tulip mania). To some, it's a Ponzi scheme - an easy way for people to part with their money without any real value at the other end. For this reason, many investors steer clear of cryptocurrency and turning instead towards tangible assets such as wealth storage and barter items such as gold coins or silver ingots. However, others believe blockchain technology could be the next game-changer, with the metal being viewed as a safe haven for investors seeking to hedge against inflation and economic uncertainty.
Gold vs bitcoin: which is better for bartering?
This is an age-old argument that has enraged many gold bugs in recent years as the price of bitcoin continued its upward trajectory while physical gold plummeted - trading at one stage this year close to 14-month lows of around $1,200/barrel (although it's since recovered to around $1300 per ounce). Critics have argued that cryptocurrencies are not backed by anything tangible whereas precious metals can be valued based on their cost of production plus a premium. This means you could use gold coins or silver ingots to trade goods after society collapses into chaos while digital currencies would be worthless. Proponents of cryptocurrencies counter that if the power grid goes down, the price of energy-driven gold mining operations could skyrocket making physical acquisition an expensive prospect - while blockchain based crypto assets are easily transportable and divisible.
Is there a correlation between gold prices and bitcoin?
Bitcoin vs Gold: Which is better for a long-term investment? This is hard to say as both assets are dependent on many different factors. The ability of central banks and governments to print more money - often referred to as monetary debasement (defined as intentional reduction in the value of money over time) - has been blamed by mainstream economists for exacerbating financial crises and hyperinflationary events in recent years, with many investors keen to diversify their portfolio by moving money into tangible assets like gold. In contrast, bitcoin's volatility, or the lack of it - against traditional currency and equities - has been praised as a stellar selling point for investors seeking more stable alternatives outside the mainstream system.
Gold vs bitcoin: Which is easier to use?
Although some people view cryptocurrency as an investment class, others see digital tokens as a cheaper way of transferring cash across borders in real time without being charged fees by third parties such as banks and governments. Gold too has been used for thousands of years as a store of wealth but buying and selling physical bars can be arduous and expensive (in addition to being illegal in some countries). Digital currencies are borderless; they're encrypted; and the only way to buy them is via the internet.
Check out our reviews of the top Gold IRA investment companies:
Invest in Augusta Precious Metals
Or read our Ultimate Guide to Gold and precious metals Investing
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