Ever since man first introduced the value of making investments, he has always been on the lookout for the best ones. This means that traditional favorites like real estate, gold, and stable government bonds have always been in great demand.
However, in the past couple of years, new financial assets and commodities are attracting investments. This includes everything from cryptocurrencies like Bitcoin and Ethereum to precious minerals and metals like Iridium that are the future of the world’s EV market.
In this resource article, we look at answer a debate that has been raging for quite some time. The debate on where you should park your investments- Bitcoin or Gold. Additionally, we are going to look at the major aspects where both Gold and Bitcoin differ.
Gold and Bitcoin: A Brief Introduction
First things first. Historically, gold has been the most preferred investment option for humans from time immemorial. Its strong and stable growth has been viewed as something that is best for normal families who are looking to protect their investments over the long run.
As compared to this, Bitcoin is a relatively newer entrant that is still very much in its infancy. While it would be an amateur mistake to dismiss gold for Bitcoin, experts recommend that Bitcoin is slowly coming of age itself.
Bitcoin and gold have long been viewed as assets that share certain similarities for investors. And this perception has only deepened in the past year or so, with both Bitcoin and gold experiencing bull runs at the height of a pandemic (even if gold has since struggled at times).
The assets responded to the crisis and its economic fallout in similar ways — both acting as investing safeguards against more widespread portfolio losses.
With all of this said, Bitcoin and gold still differ significantly as investable commodities, and not just because gold has fallen back down to Earth of late while Bitcoin remains amid an unprecedented surge.
Key factors that distinguish the two assets specifically as investments:
Arguably the biggest difference between Bitcoin and gold is how they are stored as investment commodities. As we covered in a beginner guide to how to buy Bitcoin, it is up to the buyer — in this context, the investor — to select a storage method.
Any given Bitcoin user needs to choose a hardware or software wallet to store the digital keys that provide unique access to the Bitcoin acquired. By contrast, it is quite rare for gold investors to take direct responsibility for storage.
While investors can buy physical coins or bullion, it is more typical for gold purchased by investors to be stored in vaults. This difference doesn’t change too much for investors, though it does put some extra responsibility on Bitcoin investors’ shoulders.
As of this writing, a single Bitcoin is worth just under $61,000. Meanwhile, an ounce of gold (the most standard unit for investors to trade in) is worth about $1,737. This discrepancy doesn’t necessarily change the options for investors, given that most deal in fractions of these assets in the first place.
But it is worth noting that in terms of units, gold investors can get more bang for their buck, so to speak. If Bitcoin’s value continues to climb, there is a chance the sheer size of the number will begin to look prohibitive to some investors, even though one needn’t deal in whole units (and few do).
However, with other cryptocurrencies in the market, investors have some great options. This means that cryptocurrencies as a whole are likely to return great margins and long-term growth. If someone has missed out on Bitcoin, they can always start investing in Ethereum or Dogecoin.
3. Trading Methods
These days, Bitcoin and gold are most easily and most commonly traded through various forms of online exchanges. However, there are also established alternative options for gold that make it somewhat more versatile.
First and foremost, gold ETFs have long served as valuable assets, acting almost as index funds for various assets attached to gold. Additionally, some invest directly in gold mining stocks rather than the metal itself.
Bitcoin is not devoid of these kinds of alternatives. Crypto ETFs are emerging, futures trading is an option, and some even invest in tech companies tied to cryptocurrency as a sort of indirect means of buying into Bitcoin. But the alternative methods are more established regarding gold.
The other crucial difference is that Bitcoin has a far more volatile history, and is expected to remain ultra-volatile moving forward — even if it maintains strength overall. Gold is subject to gains and losses and is actually at the tail end of a fairly volatile stretch by its standards.
But it has historically been valued for its relative stability, whereas Bitcoin is virtually synonymous with volatility. There is no doubt that gold and real estate continue to inspire confidence, especially when inflation rates hit the ceiling.
However, it should be pointed out that it is Bitcoin’s volatility that is its major attraction. This is what has attracted a new breed of investors to Bitcoin. These investors are not worried about long-term stability and growth. They are here to invest a few thousand dollars and walk away with millions after Bitcoin goes on one of its Bull Runs.
The Bottom Line
None of these differences make one asset better suited to investment than the other. But as Bitcoin and gold continue to be compared, it’s increasingly important to recognize some of the fundamental distinctions between them.
At the end of the day, choosing between both these assets is a personal choice. Both have their merits and demerits and to say that one is better than the other will be a gross under-representation of their values and features,
With the Coronavirus pandemic unleashing widespread inflation woes, both Gold and Bitcoin are expected to rise shortly. If you have any more questions you would like us to answer, drop them in the comments section below.