Historically, investors have considered gold as a safe investment choice. Gold forms a considerable portion of the investment portfolio and it yields good returns too. Since the pandemic, however, another asset has emerged as a popular investment choice, that being Bitcoin. Yes, Bitcoin outperformed gold in the pandemic year in terms of returns as millions of investors took interest and trusted in this digital currency as a safe haven for their money.
Gold has always been the investor’s go-to option in a recession, and it performs well during market corrections. It is also the ultimate currency of the country’s central bank. Bitcoin, which is a digital currency, was launched in 2009 and eventually became popular among crypto enthusiasts. Bitcoin runs on a decentralised network and is very safe due to its blockchain technology. During the pandemic, when the prices of almost all stocks were falling, that of Bitcoin was soaring.
Both Gold and Bitcoin are used as alternative investments to diversify the portfolio. Both are also good investment options against fiat currency inflation. Then, how is a digital currency so recent in nature compared against an investment option that has been used for hedging for thousands of years? Which fits better in an investor’s portfolio from a long-term investment perspective of saving them on a rainy day?
For this, let’s explore Gold vs. Bitcoin.
Gold vs. Bitcoin- Transparency is the key
Gold is very well regulated by various governments and their respective policies. There are regulations for tracking, weighing, and selling Gold. This also ensures legality, transparency, quality assurance, and safety. Bitcoin also provides a very high level of transparency as its blockchain system allows the whole system to be transparent and decentralised. The quality of all Bitcoins is the same due to their nature, and it is easier to store than physical Gold. The legal status of Bitcoin is different in different countries.
Gold vs Bitcoin – Factoring in the Volatility
Gold is not as volatile as Bitcoin. However, those with a moderate risk appetite can surely go for Bitcoin as an investment proposition.
Bitcoin vs. Gold – Which one can you use more?
Gold is used for consumer goods such as jewelry and gold coins. It also has specific applications in electronics, currency, and luxury goods. Bitcoin too is used to buy and sell a variety of things. Besides that, its applicability in financial technologies of the future is promising.
Bitcoin vs. Gold – Which is more liquid?
Bitcoin is generally very liquid as it allows the transactions to be completed in very short amounts of time. However, in an unfavourable economic situation, Bitcoin might have a daily limit making it difficult to liquidate a huge amount quickly. Gold is a highly liquid asset as it can be easily exchanged for cash, and there are many buyers and sellers of Gold.
Is Gold rarer than Bitcoin?
Bitcoin cannot simply be created. Satoshi Nakamoto created a limited supply of 21 million Bitcoin tokens making Bitcoin rare and limited. This makes it rare as compared to other cryptocurrencies on the blockchain. However, the yellow metal itself is a rare metal of limited supply compared to other metals. The scarce nature of Gold affects its demand and supply in the market. Despite a heavy demand, supply usually seems low. In other words, both Bitcoin and Gold are rare in their own right.
Gold has one of the biggest consumer bases in the world. At the same time, Bitcoin has also developed an extensive consumer base in a shorter span of time. Both have their own merits and demerits. While Gold has the trust of investors in it along with the features that make it a good investment option, the new age world realises the potential of investing in Bitcoin and digital currency as a whole. Bitcoin’s market cap is predicted to grow multifold with increased investor trust and knowledge in the coming years.
Many investors have started diversifying their portfolios by investing in both Bitcoin and Gold to keep up with the times and gain good long-term returns. However, it depends more upon the investor’s risk appetite, research, capital at hand, investing strategy, and investment psychology to decide whether to go for Bitcoin or for gold.