Cryptocurrency is one of the newest modes of investment. Gold, on the other hand, is a investment option for thousands of years. There are different types of investors in the world. Some like to take risks to gain more, while others take less risks to gain less. Cryptocurrency is a better investment option for many reasons. Let us analyze each of the points in the debate.
Gold is a tangible asset. Many investors invest in gold as a store of wealth. In India and China, gold jewelry is very popular. In volatile economic situations, gold often performs well. This is because gold maintains its value and its price remains steady. Investors use gold to protect their savings. For example, if there is high inflation then gold can protect investors from losing their money.
Cryptocurrency is comparatively a newer asset class existing for less than 2 decades. Investment in cryptocurrency can be great at times. This is because these can generate huge returns overnight. However, compared to gold, cryptocurrencies are more volatile in nature. Investors must conduct prior research before investing in any cryptocurrency. Once the research is over, investors can allot an amount of their investment. There are trading platforms such as YaCrypto to invest in Bitcoin, Ethereum, and other digital assets.
The gold vs. cryptocurrency debate is judged on the point of diversification. Cryptocurrencies offer positive diversification, especially during inflation. Many wise investors use cryptocurrency to diversify their risks. This helps them to protect their hard-earned savings. Cryptocurrencies such as Ethereum and Bitcoin have an option for specific investment funds. These funds manage cryptocurrencies professionally. However, there are no guaranteed gains compared to term deposits.
Gold on the other hand lacks diversity. The ICE Benchmark Administration (IBA) publishes the gold rates in US Dollars. There is no autonomy when it comes to deciding gold prices.
Scarcity and value are inversely correlated. On the issue of scarcity, cryptos like Bitcoin have a slight edge over gold. Gold supply is not unlimited and only 3/4th of gold has been mined. Over 50 thousand metric tons of gold remain beneath the Earth. For example, the supply of cryptocurrency is finite too. Only 21 million BTC will be produced. This is because it is based on computer code. Such codes cannot be tampered with easily.
Gold storage is quite risky. This is because one needs to have a secured vault in their house to store it. Some investors rent a bank vault and store their gold for better security. It is difficult to move around with a gold bar in a crowded place. Since gold lacks liquidity, it is hard to carry out fast transactions with physical gold. Therefore, it needs to be converted into fiat money.
Cryptocurrencies on the other hand are easier to store and move around. Some cryptocurrencies such as Bitcoin can be divided into decimals for faster transactions. Most cryptocurrency exchange platforms offer high-level protection to cryptocurrencies.
Cryptocurrencies are newer asset classes, unlike gold. This is also beneficial in some ways. Large professional fund managers created investment funds only for investing in Bitcoins and other cryptos.
Gold is indeed less volatile than cryptocurrencies. However, it is also true that higher risks can sometimes lead to higher gains. For example, the price of Bitcoin alone has risen remarkably. In 2020, the price of Bitcoins increased by four times. This is the reason many investors encourage cryptocurrency investment. Gold investment was marginally profitable in 2022 and the average return for gold was only 0.4 percent.
Cryptocurrency is a better investment option because it does not need third-party intermediaries. Some transfers can even be faster than fiat currency transactions. Cryptocurrencies, unlike gold, can offer flash loans. These flash loans take only a few minutes and do not require any collateral.
Risk tolerance is a major deciding factor. Investors who have higher risk tolerance can choose cryptocurrency over gold. This is because gold is less volatile. It is also true that millions of individuals are trusting cryptocurrencies as a form of investment. In the future, it can become a good alternative to fiat currency. Some financial experts believe that cryptocurrencies can even challenge the central banks. Gold unfortunately does not have any such possibility in the future.
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