Bitcoin or gold – which asset is better to invest in?
What to choose-Bitcoin or gold? Is it worth investing in bitcoin, digital gold, or should you invest in a" safe haven " – gold?
As inflationary pressures increase, investors fear that the value of their money will decrease. Storing gold in your portfolio may be one of the ways to invest to protect your purchasing power, but there is an alternative asset class whose popularity has increased dramatically in recent years – this is cryptocurrency. Today you will learn where to invest your free funds – in bitcoin or gold, whether there is a place for a new digital asset in your investment portfolio, or you should stick to something traditional, for example, gold.
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Gold is a safe haven asset
Gold has been around for many centuries. People value gold because it is a time-tested source of security. Gold is a well-established asset that is widely used by investment professionals. Central banks, large government agencies and pension funds will always have a positive attitude towards gold.
Some investors like to think of gold as an insurance policy for their money. If there is concern about the national currency or an economic collapse, people usually turn to gold because it brings benefits during a crisis. Although in the short term, gold prices experience volatility, like stocks, but over time, the value of the precious metal remains stable. Since we live in a time of great market volatility, it makes sense to allocate part of your portfolio to gold.
Gold prices can benefit from inflation, which makes it an excellent means of protection against inflation. When prices rise, the value of fiat currencies decreases, and the value of gold increases, because investors invest their money in the precious metal to protect their purchasing power.
But since gold does not bring interest or dividends, some investors may wonder whether this asset is worth the investment. Gold does not provide any permanent income compared to other asset classes, such as real estate (rental income) or stocks (dividend income). However, the meaning of gold is not in income, it is used to preserve wealth in times of uncertainty.
Experts believe that if you are looking for a safe haven asset that is negatively correlated with other assets, gold plays an important role in the stability of your portfolio as a "buy and hold"investment. It also acts as a diversifier, an inflation hedge and a capital guard. All these advantages can eventually lead to a positive return.
There are several ways to buy gold. Investors have the option to buy physical gold bars or gold coins, which usually have a higher entry barrier, or you can buy gold on the exchange at a better price.
Bitcoin is the world's largest cryptocurrency by market capitalization. Unlike the stock market, which is open for trading during the working week from 9: 30 to 16: 00 hours, cryptocurrency exchanges allow traders to trade bitcoins and other digital assets 24 hours a day, seven days a week.
Binance is the best cryptocurrency exchange.
One of the key features of bitcoin is that it has a fixed limitthis means that there will be only 21 million bitcoins in circulation. Given the fixed volume of the asset, if the demand for cryptocurrency continues, the value of bitcoin will continue to grow. Like gold and other precious metals, bitcoin largely gets its value due to limited supply and growing consumer demand.
However, the reality is that bitcoin prices are experiencing extreme volatility. In the last month alone, the price of bitcoin has fallen from almost $ 60,000 in early May to about $ 32,000 in early June. In addition, bitcoin has not yet become widespread, so investors are wondering to what extent digital currencies will be accepted in the future.
Bitcoin is a huge speculative asset, and its long-term correlation with other asset classes still requires more time to work out due to high volatility. Cryptocurrency is a new class of digital assets, which is only about 12 years old. Given the short existence of bitcoin on the market, the asset does not have such a long reputation as gold.
Bitcoin price fluctuations can be difficult for investors to predict. This instability stems from a number of events, from the persecution of cryptocurrencies in China to Elon Musk's tweets about the digital asset. Despite these disadvantages, experts believe that bitcoin can play an important role in your portfolio.
Another popular feature of bitcoin is the blockchain technology on which it is based. This revolutionary technology acts as a virtual intermediary in the exchange of money between people, eliminating physical intermediaries such as banks and other financial institutions, and expanding the possibilities of a decentralized market.
See also how to buy Bitcoin.
Is it worth investinginvest in bitcoin or gold?
As we move towards a cashless society, and digital currencies become more common, it is reasonable to consider whether it is worth investing in an asset class such as cryptocurrencies.
"I personally would prefer to use bitcoin rather than gold in my portfolio, since bitcoin is really decentralized and has a limited amount, I can also use bitcoin for transactions with anyone from anywhere in the world," says Ricardo Pina, founder and CEO of The Modest Wallet.
But it is also important to take into account the proven advantages of gold, since gold is an asset with a stable price. If you can't decide which asset to choose for investing – bitcoin or gold, then use the recommendation of John Carter, the founder of Simpler Trading.
"For the safety and preservation of your funds during the crisis, use gold. For speculation – bitcoin. I think it makes sense to buy both, and for an aggressive distribution, I would go for 50% of bitcoins and 50% of gold, " says John Carter.
Thus, everything depends on your trading style and investment preferences.
Read also the article "The best cryptocurrencies of 2023".