Gold has definitely grown over the last 20 years. However, it looks different in 2021. The price of gold has fallen by 9%, while other classes such as real estate, stocks, and the dollar have risen. Gold has provided positive returns. Cryptocurrencies have dulled the shine of gold, and have provided better returns than gold. It is for this reason that cryptocurrency is the hottest investment trend.
Traditionally, stock volatility was hedged against with gold, but a new alternative has emerged which challenges the old-school safe haven method. Bitcoin is the dominant cryptocurrency, and it has many characteristics of both a general currency and one that allows it to be used as a shelter.
We draw a comparison between Gold and Bitcoin in the midst of the gold price moving sideways and cryptocurrency’s resurgence over the past few years.
Gold, the Safe-Haven Asset
People value gold because it has been tested over time, while Bitcoin hasn’t been around during a major financial crisis like the Great Recession. If a nation’s currency is threatened or if there is an economic collapse, investors typically flock to gold as an insurance policy. Over the long term, gold’s value remains stable. In a time when markets are extremely volatile, it makes sense to hold some gold in your portfolio.
Inflation can boost gold prices, making it a great inflation hedge. When prices rise, fiat currencies lose value, but gold rises in value as investors invest to maintain their purchasing power. Due to gold’s lack of interest or dividends, many may question its value.
Other downsides to consider are high storage costs, low liquidity, and difficulty verifying the purity of the gold source.
Gold, experts say, acts as a safe haven asset and acts as a diversifier, inflation hedge, and capital preserver, making it a great investment tool if you are seeking the stability of your portfolio.
A gold investment can come in several forms. Physical gold, gold coins, or gold equities, which usually have a higher entry barrier, or exchange-traded funds.
Bitcoin, Digital Gold?
Market capitalization measures how valuable Bitcoin is.
The cryptocurrency markets are open 24/7, seven days a week, unlike the stock market, which is open from 9:30 AM to 4 PM EST during the week.
There will only ever be 21 million Bitcoins in circulation because Bitcoin has a fixed supply. Because Bitcoin has a fixed supply, if there is continued demand for the cryptocurrency, the value will theoretically rise but it is still uncertain. Bitcoin’s value is derived from its limited supply and rising market demand, just as it is with gold and other precious metals.
In addition, Bitcoin hasn’t been widely adopted yet, which makes investors wonder what degree digital currencies will be accepted in the future. As a result, there’s speculation about where Bitcoin’s price will go.
Bitcoin, as a volatile and risky asset, is difficult to manage for the everyday investor due to its massive price swings. Several factors have contributed to this volatility, including China’s crackdown on cryptocurrencies and Elon Musk’s tweets about the digital asset. Bitcoin could be a valuable addition to your portfolio, experts say, despite these setbacks.
The blockchain technology that powers Bitcoin is another popular feature. This revolutionary technology is changing the way we transact. It eliminates the middleman like banks and other financial institutions and empowers a decentralized market.
Should You Invest in Gold or Bitcoin?
It is reasonable to consider investing in a new asset class like Bitcoin as we move toward a cashless society and digital currencies become more prevalent.
Since Bitcoin is truly decentralized, has a finite supply, and can be used anywhere in the world to transact, I would personally prefer Bitcoin to gold for my portfolio.
Furthermore, gold’s proven merits should also be considered. Since gold is a price-stable asset, it is unnecessary to transact with it unless you are changing your investment strategy. With Bitcoin, the approach is different.
If the value of Bitcoin moves in your favor, you’ll also have to decide when and if to take profits. As Bitcoin is a volatile asset, you may want to have an entry and exit strategy.
Gold or bitcoin is a question that many are wondering when it comes to choosing which asset to invest in, experts on the subject say it depends on your investment goals. Bitcoin is considered speculative given that its utility is yet to be determined.
I believe it makes sense to invest in both gold and bitcoin, and I would recommend a 50/50 allocation between gold and bitcoin for aggressive investment. says the expert.
