Which Investment is Better: Bitcoin or Gold?

A series of unfortunate and unexpected events this year sent the world to a situation similar to that of the 1929 US Depression. The pandemic triggered a global recession, and it seems like analysts and economists have all agreed that this is not going to get better any time soon. In times like these, investors and even non-investors are scrambling to preserve wealth, income, and resources.

Traditional investors would usually preserve their wealth by purchasing gold. This helps them hedge against stock market volatility, and this makes sense—Gold is still proven as a safe and recession-proof investment, even in modern times.

However in a digital-driven economy like what we have now, Gold is less ideal. Many investors nowadays look into diversifying their portfolio, and investing in digital assets like Bitcoin is now a possibility. If you want to know more about investing in Bitcoin, and how it fares against gold, let’s discuss their advantages and disadvantages below.

GOLD: The Safest Traditional Asset

As an asset, gold is a strong safe-haven. Up to this day, gold is still used for the creation of consumer goods such as luxury items and electronics. Hence, it always has good value. However, gold is rare and scarce. So no matter how high the demand is, the supply remains low—making its price high and stable.

Furthermore, gold can never be manufactured either. However, due to the rarity and complicated process of obtaining gold, there are many attempts to counterfeit this material. Some gold bars are tainted with Tungsten—and are passed off as pure to unsuspecting buyers.

Gold has been tied to the dollar until 1971 when President Nixon removed the US from the gold standard. Since then, stock investors who prefer gold investments moved their money to the gold market—now worth 9 trillion dollars. And because it is not tied to the dollar, gold is more stable and is not affected by the fluctuations in stocks or oil prices.

BITCOIN: The Digital Version of Gold

Many know Bitcoin as a type of cryptocurrency, but what many don’t know is that Bitcoin possesses similar characteristics with Gold. It shares the same features in a sense that like Gold, Bitcoin is distributable and limited in supply.

Satoshi Nakamoto, the creator of Bitcoin limited the supply to 21 million BTC. This supply is expected to last only until 2041. But in 2017 alone, Bitcoin surpassed the price of a single ounce of gold for the first time. This makes it a very good asset to invest in.

Gold vs Bitcoin

As an investment, let’s look at Gold and Bitcoin in 5 different aspects.

1. Safety and Legality

Gold is an established commodity, and it is hard to steal or corrupt. Bitcoin by definition is even harder to corrupt, given that it is based on an encrypted, decentralized, and complicated algorithm backed by the largest computer network infrastructure of today.

2. Rarity

Both are rare and limited, but it is uncertain when gold will run out since new sources could be identified at any time. Bitcoin, on the other hand, has a definite supply and as mentioned, could only last until 2041.

3. Base Value

Gold is mostly utilized in luxury items such as jewelry. On the other hand, Bitcoin is rooted in its technology—which remains inseparable from its nature as a cryptocurrency. It can be said that it is a form of money that cannot be debased or censored.

4. Liquidity

Getting fiat cash for your gold investments is easy and doable. Recently, however, Bitcoin takes pride in its new line of ATMs which are accessible through digital wallets and mobile applications.

5. Volatility

In terms of volatility, Gold is the more stable one. Bitcoin is highly volatile; and it can have wild swings in just a span of hours. As a newer asset, Bitcoin is more susceptible to volatility, but its huge growth in value is really something good to take note of. Since 2009, Bitcoin has risen over 9 million percent in value.

At the end of the day, only the investor can make the call—whether he/she should invest in Gold, Bitcoin, or both. Making an investment in both is also a good option. A diversified portfolio can help cushion risks—especially in a time of uncertainty.