Bitcoin vs Gold

Last updated on March 31st, 2024 at 05:55 pm

Bitcoin and gold are the two safe havens of 2020. The question is, which one is the better asset? Bitcoin vs Gold? While both are “mined,” their only real-world or virtual applications seem to be as tools of pure speculation.

This is what investors call a “safe haven”. It means an investment that should retain or increase in value during times of market turbulence. Investors seek them to limit their exposure to losses in the event of market downturns. The price of an ounce of gold and a single bitcoin bounced dramatically after governments and central banks worldwide pumped money into consumers’ wallets and banks’ coffers as Covid-19 caused a global recession.

The ultimate question is, which of the two assets is a good fit for your portfolio: bitcoin vs gold.

Gold and bitcoin represent different phases of how people think about “money.” Gold was a currency for thousands of years. It retains value in part by the psychological and historical attachment investors have to it. Bitcoin, along with block-chain technology, hopes to one day replace government currencies.

“For thousands of years, gold has been the ultimate financial safe haven. Moving forward, older investors are likely to continue with gold, but millennials and Generation Z, who are so-called ‘digital natives’, can be expected to go for Bitcoin and other digital currencies instead.”

Nigel Green, deVere Group

Gold

You can add gold to a well-diversified portfolio of stocks and bonds, but experts reason it shouldn’t amount to more than 10% of your holdings. While research shows the value of gold remains constant over a very long period—like a millennium or two—it can’t be counted on as a store of value over a more modest period. It’s simply much too volatile.
As an investment, gold is a more mature asset. As such, it tends to be easier to own. There’s no need to commit yourself to own physical gold, with its high costs of secure storage.

Bitcoin

Bitcoin is an electronic payment system that exists beyond the control of any central government. While people have been using gold as a medium of exchange for 5,000 years, bitcoin is a much more recent affair.

The cryptocurrency rose to nearly $20,000 per bitcoin by the end of 2017, only to drop to less than $4,000 by the end of 2018. More recently, the cryptocurrency bounced around right along with stocks and gold.

The most common way to invest with Bitcoin is to open an account on a cryptocurrency specific exchange, like Coinbase, and actually exchange your dollars for the digital currency. You will then need to hold it in a digital cryptocurrency wallet.

“Bitcoin will replace gold as the ultimate financial safe haven within a generation”.

Nigel Green, deVere Group

Why do investors buy both?

Both gold and bitcoin tend to attract investors, especially during this time of struggling economies.
Governments reduce the value of their fiat currencies when they print lots of money and drop interest rates close to zero. Investors respond by putting cash into currencies, which the central governments cannot control.

Currently, both Gold and Bitcoin have a very good year. Moreover, the cryptocurrency market has found a way to capitalize on the stability of the gold price and its resilience during a financial crisis. Cryptocurrency startups have launched gold-backed coins, like CACHE Gold. They are crypto tokens, which are backed by an allocated amount of physical gold.

This new concept brings a specific class of investors to the market. They can invest in both assets at the same time, without going through the gold vs bitcoin question. However one of the few challenges that the gold-backed crypto market is facing is the price correlation between the gold token and the actual price of gold.

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