Over the years, bitcoin has become popular as an investment option that can give significant returns in a very short period. In fact, the returns of bitcoin investments are so great that people can be often seen comparing it to other high-class but traditional assets such as gold and stocks. So, the question is whether or not bitcoin is a better investment asset than gold. Let’s figure it out.
What is the Gold hype all about?
Gold has been a prominent store of value for not decades but centuries. People have been using gold not only as a way to store funds/money but also as a hedge against inflation and market drops, which is true in most cases. We have often seen cases where the price of gold moves up when stocks or other traditional markets are falling. The latest of this happened during the COVID pandemic in 2020 when global markets were falling like they’d never stop. However, the gold price continued rising during this period and reached its all-time high before falling back as the markets started recovering in early 2021. So, it won’t be wrong to say that gold can act as a wonderful sanctuary against inflation.
The price of gold has only increased with time if we look at the historical charts. But, the key here is to remain invested for the long term. Gold, unlike cryptocurrency, is not an ideal investment for short-term profit seekers.
One thing that is similar between gold and bitcoin is that both assets have their values derived from social construction. Same as Bitcoin, the value of gold depends on its demand and scarcity. However, gold prices are relatively more stable as compared to that of bitcoin (cryptocurrencies).
Is Gold better or Bitcoin for your next investment?
The biggest difference between gold and bitcoin is in terms of price stability. Since the price of gold is somewhat governed by global standards, it is relatively more stable than the price of cryptocurrencies like bitcoin and rises steadily with time.
Bitcoin is, by nature, a highly volatile digital asset. The fluctuations in the bitcoin price can be pretty wide and unpredictable. This is why the risk in bitcoin investment is much higher. At the same time, bitcoin can handsomely reward investors in the short term.
Talking about rewards/returns, there is simply no comparison between gold and bitcoin. While the price of gold has only about doubled in the past five years, the bitcoin price has increased nearly 100 times during the same period. Say, if you had invested $1,000 both in gold and bitcoin in 2016, your gold asset would be worth around $2,000 now, while your bitcoin holdings would have a value of $100,000. Pretty awesome, right?
But, the thing with bitcoin is that its high reward capacity comes with significant risks. There is no saying that the price of bitcoin will continue to increase and you’ll only make profits from it. There is a notable downside to investing in bitcoin. For instance, the price of bitcoin dropped to almost half between April 2021 and July 2021. So, if you had purchased Bitcoin in April 2021, you’d be under loss right now. That makes bitcoin a bad investment for you.
Well, patience is the key when you are dealing with something as volatile as cryptocurrencies. The gold price, on the other hand, is relatively stable over time and will not give you heart attacks with sudden price drops.
For serious bitcoin lovers and enthusiasts, the reason to invest in bitcoin is not limited to its profitability. There is a bigger system in work behind the scene for bitcoin. It’s the decentralized technology called blockchain that powers bitcoin and most other cryptocurrencies out there. The concept of decentralized currency allows it to operate without the governance or control of centralized entities such as governments or banks. Basically, you can send/receive cryptocurrencies without having to go through an intermediary like your bank. Also, since cryptocurrencies like the Libra coin operate on a global level, they are far easier to move and transfer on a global platform, which is not true in the case of gold.
That said, if you are looking to diversify your portfolio, both gold and bitcoin make wonderful asset options to invest in. While gold offers long-term stability, bitcoin has the potential to grow significantly over time.
Source: https://vocal.media/