Friday, May 7, 2021

Bitcoin Vs. Gold: How Do They Compare?

As bitcoin continues to rise, achieving new records and crossing the $1 trillion market capitalization, an increasing number of investors are trying to compare the popular cryptocurrency and the well-known asset class: gold.

According to experts, both assets are considered excellent options to diversify a portfolio or as a hedge against fiat currency inflation brought about by unsustainable fiscal and monetary policies. Nevertheless, until recently, it was a rare sight to have chief executives, Wall Street analysts, and established investors compare the two assets.

Bitcoin, popularly referred to as digital gold, is often seen as a risky hypothetical investment for those looking to make gains in the short term. On the other hand, gold is considered a haven for investors.

Currently, backed by new investments from Tesla and other popular institutional names, and the emergence of multiple sportsbooks that allow cryptocurrencies and bitcoin’s ascent to over $57,000 per coin has resulted in people questioning whether old assumptions about these assets are correct.

Taking into consideration digital currencies’ rocky climb, we discuss whether bitcoin is a better investment for potential short-term gain—though there are chances of losing a lot of money. Nonetheless, gold is a stable investment that is guaranteed to return on your investment in the long run.

Gold

Pros

  • Stable

Gold proves to be a stable investment in the long run.  Over time, it has consistently risen in value, and the price of gold often increases even during the economic recession. As it has been in use for so many years as a backing of the currency, it can safely be seen as a stable investment that way as well.

  • Longevity

Gold has been historically used as a currency globally across time periods. Its utility, beauty, and scarcity made it the perfect baseline for trading and attributing value. Furthermore, it being in usage for as long as the civilizations have been around has helped it stand the test of time and prove its integral value. So, when you invest in gold, you can be sure that it won’t stop having value suddenly one day.

  • Safe in Vault

When you have your gold stored in a precious metals IRA, it will be kept in a certain safe vault that is overseen and managed by a custodian. Typically, these accounts are insured up to a specific amount like with a traditional bank account. Hence, you can sit back and relax, knowing your investment is safe.

Cons

  • Can’t Be Used as Currency

During the event of an economic crisis where traditional fiat currencies become non-viable, gold can be used as a currency. Nonetheless, in the present day, gold is not a viable way to buy something. Though a few gold coins are recognized as currency, the value of the gold the coin is crafted from is worth more than the face value of the coin.

  • Should Be Stored

When you say you own gold, you are actually telling you own a physical item that must be safely stored somewhere. Generally, a precious metals IRA is a popular and safe option. On the other hand, if you prefer keeping your gold in your home, it should be stored safely in a vault or safe. Even then, there is a possibility that it can be stolen from your possession.

Bitcoin

Pros

  • Easily Sold

Bitcoin being completely digital, can be easily transferred to another user and sold for its original USD value. You can either meet with another user, transfer your bitcoins through a QR code, or use a third-party exchange service that will digitally connect you with a buyer.

  • Can Be Used as Currency

All you need to use bitcoin as a digital currency is a mobile wallet app that allows you to pay with bitcoin and a store that accepts bitcoin. Not all retailers accept bitcoin as a form of payment.

  • Emerging

Bitcoin is still new to the financial arena—it has been around for only ten years. Thus, it is considered an emerging investment that holds the potential to significantly rise in value. Hence, investing in bitcoin now will lead you to huge payoffs down the lane. A lot of people have already cashed out on their bitcoin investments and retired.

Cons

  • Volatile

Along the lines of the previous, as bitcoin is an emerging asset, it is highly volatile. Meaning it is prone to large price fluctuations within a short duration. Almost all volatile investments can potentially return greater profits. Nonetheless, they also have the ability to crash just as heavily.

  • Subject to Scams

Though bitcoin is said to be completely digital, you still require a place to store it—whether it a mobile wallet, a web platform, or a physical hard drive. There are both benefits and drawbacks associated with each storage option. Web-based wallets can be easily hacked, and your bitcoins can be stolen. Similarly, physical wallets like an external hard drive or a flash drive can be stolen from your possession.

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