As countries keep experiencing economic uncertainty, investors are seeking safe havens for their finances. In the past, the popular strategy was to invest in gold. But there is a new kid in the block that has even more prospects than gold – Bitcoin.
Created in 2009, Bitcoin has led to the launch of new investment opportunities in an era of digital assets. Bitcoin is the dominant coin in the crypto world, therefore it remains the most viable option for investors who want to include cryptocurrency in their financial portfolios.
The billionaire, Ray Dalio for instance stated in a recent interview that Bitcoin is like a digital form of gold while some investment analysts are claiming that BTC is poised to overtake gold. This makes it confusing for a lot of people to decide which asset to go for if given a choice.
For an investor like Dalio who said that BTC makes up a small fraction of his portfolio, his interest in Bitcoin is as a diversification tool while there are many others holding the coin as their primary asset with the expectation of growth.
According to Dalio:
I own a very small amount of bitcoin. I’m not a big owner,” He maintained that, “There are certain assets that you want to own to diversify the portfolio, and bitcoin is something like a digital gold.
What is obvious from the opinion of Dalio who is a known gold bull is that he is pro gold due to the relative stability of the asset in comparison to gold. Nevertheless, he is also aware of the potentials and gains inherent in holding a digital asset such as Bitcoin, which is the reason why he referred to it as Digital Gold.
Below, we discuss the advantages gold and Bitcoin have over each other, and which investment option is best for investors.
Advantages of Bitcoin Over Gold
Bitcoin has many advantages over gold which makes it more appealing to investors who have a healthy risk appetite. The benefits of Bitcoin over gold are:
- The price of Bitcoin appreciates as more governments, financial institutions, and individuals pick interest in it.
- Bitcoin is based on blockchain technology that is more transparent, and easily accessible.
- Since Bitcoin is a digital asset, it does not require physical storage systems. Gold on the other hand requires physical storage which might be expensive if the gold is in large quantity. The digital nature of Bitcoin makes it desirable to the younger generation who are tech savvy and wouldn’t want to be encumbered with the process involved in storage and security of physical assets such as gold.
- Bitcoin despite its volatility is still a finite asset. So there is a measure of scarcity associated with it.
Advantages of Gold Over Bitcoin
For ages, gold has been the traditional haven for investors. The advent of digital currencies like Bitcoin has led more investors to question the investment viability of gold. The advantages of gold over Bitcoin include:
- Gold is more stable than Bitcoin and it can be used as a store of value during periods of war and economic uncertainty.
- Gold is not hackable. Unlike Bitcoin that is prone to cyber-attacks, gold can be kept in banks and insured against theft.
- Owing to its long history of stability and its use in producing consumer goods, gold remains the best asset among governments of the world.
The Better Investment Between Bitcoin And Gold
The current market trends and forecasts prove Bitcoin to be a better investment option than gold. Over the past couple of years, Bitcoin has greatly appreciated. Thus, it has become a store of value just like gold. And given the recent bull run, it is only a matter of time before Bitcoin’s market cap exceeds gold’s market cap. Nevertheless, Bitcoin has its limitations. This is the reason why most of the investors in digital assets are the digitally savvy younger generation.
Since investors are in the market with the sole purpose of increasing their financial portfolio, it is they should study assets to gain more information before making decisions. Because this vital step will aid investors to make informed decisions about the better investment option and guard against loss.
Also bear in mind that both Bitcoin and gold are scarce assets. There are just 21 million bitcoins and a limited supply of gold. The implication is that you could invest in any of these assets that you’re comfortable with. It is not a bad idea investing in both assets. The stability in the price of gold balances out the volatility of the price of Bitcoin. There are arguments in support and against the premise that both assets can be used as hedge against inflation. This is why most central banks keep reserve of gold. It is left to be seen if monetary policies back the use of Bitcoin also as a hedge against inflation down the line.