You have hit a profit of $50,000 which you wish to invest in something worth it. Also, on the other hand, you have only two options to invest, either gold or bitcoin.
Which one will you choose?
Hard to decide right? How about analyzing a few factors on which is the best investment and then deciding on the same?
Sounds good? Then, let’s begin.
Investment in Gold
Gold is a strong safe-haven asset! How?
Suppose you decide to invest in gold, you can consider it a stable investment. The gold prices increased consistently in recent times. The price usually rises in time of recession which can be counted as an advantage for you to invest.
Gold has long existed in the world and people have been using it as a currency across the world since ancient times. The utility, beauty, and scarcity of gold have made a way for ideal baseline trading. Ultimately, during the difficult times, Gold performs well as it is an asset that remains static while others alter. Also, as more and more people invest in gold, the prices also increase accordingly.
Investment in Bitcoin
Now, that you have an overview of investing in gold, let me give you a brief idea of investing in Bitcoin. It is also considered as a safe-haven asset because of various reasons described below.
Bitcoin is a Blockchain-based digital currency having properties that are similar to gold. Moreover, Bitcoin is called “Digital Gold” due to its weak relationship with other assets like stocks. Transactions using Bitcoin are much easier as they can be transferred easily from one person to another and can also be sold in USD value.
Suppose you have a mobile wallet app, then you can use it as a payment way to the stores that accept Bitcoins. It’s been 12 years for the launch of Bitcoin and as it is new in the market, there are chances that the price will increase gradually. The supply of Bitcoin is also limited to 21 million tokens and the Bitcoin protocol ensures that the final bitcoin won’t be issued until 2140.
Similarities Between Gold & Bitcoin
While you are comparing both the assets, it is also important to know if there are any similarities in them. If yes, then what are they?
Scarcity: The maximum supply of Bitcoin is limited to 21 million bitcoins, of which 18.4 million have been already used. The supply of Gold depends on the efforts that are put to dig gold and how much is found.
Durability: Bitcoins and Gold are perfectly durable. Bitcoin survives on the internet, so as long as the internet is available, Bitcoin will be alive. Bitcoin and Gold both require miners. Gold is used for commerce, design jewelry, and other uses. Bitcoin is useful in creating smart contracts, voting, betting, and various other uses.
Divisibility: 1 Bitcoin can be divided into 100,000,000 Satoshis. Gold can also be divided but not as easily as Bitcoin.
Duplicity: You cannot cheat and create any amount of Gold or Bitcoin. Also, you cannot have duplicates of the two assets.
Liquidity: Both Gold and Bitcoin are easily convertible to any fiat currency.
Bitcoin Vs Gold
To start with, for investors and traders, both Bitcoin and Gold are two different markets that they need to focus on. Bitcoin is a P2P decentralized digital currency that came into existence in 2009. While the precious metal gold exists since millennia.
Although gold is dominating the world for hundreds of years, Bitcoin which launched a few years back has already achieved good recognition in the past years. Let me drive you through the major differences between the two assets to help you better decide which is the better investment.
Let’s get started.
Bitcoin is a safe asset because of its volatility. Before you invest in this digital currency, you need to look at the price of Bitcoin in the past two years to get a slight idea about its price wave. During the first week of Jan 2018, Bitcoin’s price reached $15,155 per coin.
But just after a year the price of Bitcoin hovered around $4,000. Also, during the span of these two years Bitcoin has seen major fluctuations in the price. And now the currency is coming to a proper position recovering all the losses incurred in the past. Besides these ups and downs bitcoin has still proved itself to be dependent.
On the other hand, gold remains stable most of the time, and the price hikes only when needed. Put differently, Gold is boring. There are many assets whose value changes with the urge of traders. But gold is constant. You buy it and store it in a safe place.
The volatility chart for Gold in the past 1 year.
The existence of Bitcoin is much lesser when compared to Gold. It means that Bitcoin is less reliable than Gold when storing value or money. Gold is seen as a value storage asset for thousands of years, whereas for Bitcoin it’s just been 10 years. As gold has a very long history, it is likely that people will trust it more than Bitcoin. No doubt investing in gold is reliable but it is also boring as your money will remain safe without any fluctuations.
On the other hand, Bitcoin is increasing at higher rates with lots of fluctuations. Those who invested in Bitcoin during 2009 could buy a car in 2017, this is why Bitcoin is more exciting and adventurous. If the government decides to quench Bitcoin or if any other technology comes into existence then there are chances that Bitcoin will disappear. Whereas Gold is not dependent on any government fancies. Hence gold is at low-risk but I’m not sure about Bitcoin.
Trading, weighing, and tracking gold is immaculate. Although gold is a physical asset, it is quite hard to steal it or corrupt the metal. Bitcoin is encrypted, has a decentralized system and complicated algorithms, because of which it is also difficult to corrupt Bitcoin.
The infrastructure of Bitcoin is yet to ensure its safety. You might have heard about the disaster of Mt. Gox exchange, so it is better the bitcoin traders be very cautious while investing or trading. In this disastrous event, a popular exchange went offline all of a sudden, and nearly $460 million worth of Bitcoins went missing. So, it is better to research properly about the exchange you’re choosing before you invest in Bitcoin or any other cryptocurrencies.
- Storage procedure
Gold is a physical asset, so it needs to be stored in vaults, bank deposit boxes, and personal safety if the gold is in fewer amounts. While Bitcoin is stored digitally using a ‘private key’ which assists the Bitcoin transactions. It is a must and should that you use a hardware or a software wallet to secure your private key before buying Bitcoins.
Gold mining is a process of extracting gold. Hundreds of tons of gold are mined every year using four processes like the placer mining process, hard rock mining, byproduct mining, and gold ore processing.
On the other hand, Bitcoin mining is the process of recording the Bitcoin transactions through a computer. Bitcoin miners work to collect bitcoins in exchange for fiat. These transaction records are stored in Bitcoin’s public ledger called Blockchain.
- Baseline Value
Both Gold and Bitcoin have their own application. Be it luxury items, electronics, dentistry, or any other applications, Gold contributes a huge part in them.
While those who do not have access to banking infrastructure and traditional means of finance, Bitcoin stands for them. Through Bitcoin, they can send money across the globe with a negligible amount of fee.
Gold is more dependent on the physical supply chains and it is hard to access gold globally. While Bitcoin does not depend on any physical supply chains and after the COVID-19 pandemic Bitcoin is highlighted to be superior in global accessibility.
Which is better?
The supply level of Bitcoin is fixed. Bitcoin offers more transparency when compared to gold. Hence, if you choose Bitcoin, there will be no inflationary pressure if overproduction persists.
Chris Burniske, blockchain products lead with ARK Investment Management said,
“A well-known characteristic about bitcoin is that it’s on a disinflationary supply schedule. While many people think of gold as being the same, gold is actually a sneakily inflationary asset”.
He further said,
“If you were to ask people what gold’s supply schedule looks like over time, they probably wouldn’t draw you something that looks like an exponential curve. With gold being sneakily inflationary, it’s not set up to preserve value in the way that bitcoin is.”
Also, recently a popular exchange Coinbase published a report that depicts that “Bitcoin will be approximately as scarce as gold”, which is further explained as,
“Bitcoin’s rate of new supply is ~3.6% per year and will soon drop to ~1.7% on May 12th, setting it on par with gold’s historic scarcity. As gold miners and refineries have gone offline, Bitcoin’s global mining ecosystem seems resilient according to hash rate measurements in recent days.”
These are a few characteristics that serve to increase bitcoin’s future utility as a means of account, exchange, and storing value. It is also expected that Bitcoin’s value and importance will grow as commerce becomes more digitized.
Whether to choose Bitcoin or Gold is quite difficult to decide as both of them remain as complementary assets. For me, Bitcoin and Gold are two different things having their own unique properties. So, no matter what you choose, it will result in a safe investment.