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Gold vs Bitcoin - Which Investment Option is the Best Today?

Gold vs Bitcoin - Which Investment Option is the Best Today? Photo 1

As you know, money that is in circulation is a good thing, because only then does it have practical value instead of being dead weight. Moreover, due to the fall of the world economy and the inflation of many national currencies in the wake of the pandemic, there is a need to invest in assets in order to at least keep your money, not to mention receiving dividends. So, should you choose gold, the safe-haven asset, or opt for a cryptocurrency that is on the rise right now? Although you continue to keep part of your investment portfolio in gold, as it is the safest way proven over time, Bitcoin is now a very interesting asset to look at. So, we are here to help you sort out whether you should invest in gold or Bitcoin.

Bitcoin Bursts onto the Scene

Introduced to the world in 2009, Bitcoin received little attention for a long time, as the concept it used was unclear to many. Since Bitcoin is the first digital token of its kind, it only interested a small group of niche enthusiasts. However, the first success came in 2010, when the initially almost worthless digital token rose in value to 9 cents per BTC. Cryptocurrency exchanges began to appear on the market, as well as miners using powerful computing systems to validate transactions in the system, thus facilitating the issuance of new coins. So, to understand why Bitcoin has become such a popular and sought-after asset, let's look at a few key features of the digital currency:

  • Bitcoin operates on a blockchain, which is a distributed database that ensures the decentralized nature of the currency. This means that there is no central authority overseeing the Bitcoin network.
  • The issuing of digital tokens is not the responsibility of banking structures but of so-called 'miners' who check blocks of transactions and add them to a distributed database.
  • This system works on trust and depends on all participants of the network. In theory, the value of digital tokens is independent of government policies (but this is not entirely true in practice).
  • Bitcoin is a peer-to-peer system thereby allowing users from different parts of the world to transfer (buy or sell) digital tokens to each other without confirmation by external authorities.
  • Thanks to the absence of a central supervisory authority and intermediaries, bitcoin transactions are completed fairly quickly and with minimal fees.

In addition, BTC is accessible to anyone with a computer or smartphone. You don't need a bank account or any payment instrument like a bank card to conduct transactions. All you need to get the digital coins from the sender is a global network connection and a special BTC wallet address, which can be registered in the system in a few minutes. With the advent of cryptocurrency exchanges, you can easily buy the required amount of digital coins with fiat money (the national currency of almost any country). Given the current capitalization and exchange rate of the digital token, it is now something like digital gold, so it is no wonder that it is attracting a lot of attention from traders and investors.

Bitcoin Digital Gold - The Ups and Downs of the Digital Token

Despite even the bold predictions of cryptocurrency analysts, the price of BTC has skyrocketed many times over the course of the token's little more than a decade of existence. However, sharp drops in value have also occurred numerous times, raising fears among investors seeking a safe-haven asset for their savings. The main source of funding for BTC is financial market liquidity. However, as long as massive flows of money from institutional investors continue to pour into the digital currency, it will be highly volatile, meaning that its price will fluctuate wildly.

BTC's volatility is precisely the factor that precludes it from being considered digital gold worth to buy it. Even a huge jump in price does not give a reason to think of a digital token as a safe haven. Another problem with BTC is the lack of acceptance of digital currencies by governments of some countries that are important players on the world stage. Since the mass acceptance of BTC is still a long way off, the token will continue to be a fairly volatile asset.

The Impact of the Covid-19 Pandemic

The rapidly spreading Covid-19 virus has caused a dramatic economic downturn in many countries. Shares of many companies plummeted in value, but the value of the digital currency was unaffected. Noticing this feature of BTC to stay at the same price level, investors started pouring huge amounts of money into it. All of this led to a surge in the value of the digital currency above $60,000 per coin in early summer 2021. Using a "buy-and-hold" strategy, investors hope the digital currency will at least maintain its value through the pandemic.

Key Reasons to Invest in Gold, the Safe-Haven Asset

Historically one of the most valuable assets, gold is still an excellent investment option. There are still few deposits of gold in the world, which ensures a constant demand for it. It is also a metal that does not corrode, which is why many nations are looking to build up their gold holdings. Gold tends to go up in value when companies' stocks get cheaper, which is why it is used as a hedge against stock market crashes. So, let's find out what features make gold a preferred investment option:

  • Strict regulation. Buying physical gold is available only to those market participants who are able to ensure its safekeeping. Buying the precious metal is possible only from dealers and brokers with special registration. Additionally, it is very difficult to forge gold. Strong regulatory infrastructure makes gold one of the safest and most reliable assets.
  • Practical usefulness. From currency and jewelry to dental and electronics applications, gold is a versatile and highly useful material providing its exceptional value which only increases with time.
  • Liquidity. Because of its ability to hold its value for a long time, gold is an excellent option for investors wishing to enter quickly and also exit fast without significant losses.

Remarkably, the price of gold has risen almost 7 times in the last 20 years. The price of around $2,100 per ounce of the precious metal peaked in 2021. Although the price of this asset has started to decline slightly amid the easing of quarantine measures and the gradual return of the world to normality after the coronavirus pandemic, gold is still a great investor tool to buy and keep savings in it. So, the question arises, should you buy gold or Bitcoin at a time when the precious metal is on the rise? We will try to give you the answer below.

Should You Invest in Gold or Bitcoin?

So, the exceptional value and utility as a rare metal for which demand is always high are now clear. However, what about Bitcoin? Given the nature of the digital token, it also has a high value. It is also very difficult to steal or counterfeit as it runs on a distributed database and is a virtual currency that cannot be physically seen or touched. However, there is still no regulatory infrastructure capable of guaranteeing the security of cryptocurrency users. In addition, Bitcoin is difficult to regulate due to the anonymous nature of the digital token.

As for the value of cryptocurrency, it stems from the trust placed in it by market participants, as well as the ability to use it as digital money. Thus, Bitcoin can be used for lending and borrowing purposes. Moreover, it is widely applicable as a speculative investment tool. However, having no physical appearance, Bitcoin is useless in a multitude of applications where gold shines.

In terms of liquidity, Bitcoin can outperform gold in this criterion. However, if you want to liquidate digital tokens for a rather large amount of fiat money, there may be difficulties due to daily limits imposed by some exchanges. The key problem with BTC is that it can plummet in value as a result of strong market fluctuations. As practice shows, the price of a digital token is highly dependent on a variety of factors, including media news, investor sentiment, market turmoil, and some political processes. As mentioned above, the high volatility of cryptocurrency is a serious risk factor that every investor should consider.

Summary

So, the answer to whether you should buy Bitcoin or gold comes down to what your investment objectives are. Do you prefer speculative investments or do you want to invest in a safe haven asset? Are you prepared to make high-risk investments, and how much capital are you prepared to lose if you fail? We recommend that you contact a trusted financial adviser as investment planning is an essential element of successful investment activity.

F.A.Q.

What is Bitcoin digital gold?

Bitcoin is a digital currency operating in a decentralized database. The expression 'Bitcoin digital gold' emerged from the recent surge in the value of BTC.

What are the reasons to invest in gold, a safe-haven asset?

Gold is a precious metal with a gradually increasing value over time. It is an excellent hedging tool when stocks of companies go down in value.

When did Bitcoin burst onto the scene?

The digital token was introduced in 2009, but the real growth in demand for the currency began in 2010 when the first cryptocurrency exchanges appeared.

What is Bitcoin's main flaw?

The high volatility reflected in sharp upward and downward price spikes is the main disadvantage of the digital token.

Should you invest in gold or Bitcoin?

The choice of an asset to invest in depends on your investment objectives and the size of your investment portfolio.

Is Bitcoin rarer than gold?

Both of these assets are rare in their categories and limited in number due to various reasons.


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