Many investors are wondering whether bitcoin can act as gold in an investment portfolio because of its increasing popularity. Many are wondering whether bitcoin can act as a good backup to gold if it goes through hard times. Gold has been a haven asset and inflation hedge for thousands of years, but Bitcoin can’t be overlooked as its price keeps rising. Consequently, it’s easy to become confused regarding which is the better investment. Therefore, we will assess both of them in order to analyze their financial advantages and disadvantages that they could possess.
What is gold investment?
Gold investment is the act of buying and trading gold coins or bars. An investor can also invest in the shares of precious metal mining companies as part of their stock market investments. These are for investors who are interested in holding stocks and would like to own gold coins and bars. It is also possible for individuals to diversify their portfolio by buying a gold ETF that is already backed by gold and does not require their own gold bars. Gold ETFs do not provide dividends, but they do provide returns as they grow in value.
Gold trading: How to get started:
- Open a trading account with a trusted platform like ISA Bullion.
- Deposit your funds and start trading gold.
- Take up your first position.
- Analyze your trades using technical and fundamental analysis
What are the advantages of gold?
There are a number of advantages to buying gold in the right circumstances, including the following:
Inflation is hedged by gold
As inflation rises, the value of gold increases, which makes it a good idea to move some of your cash into precious metals to take advantage of such an increase. The price of gold rises as inflation rises, so it becomes pointless to hold cash because you will keep losing money. Gold can solve this problem.
Gold provides diversification
In the current market environment, some investors are investing in gold as a key asset to build a diversified portfolio, which will help them reduce risk because they will not be putting all their money into one asset class. In addition, gold can be a great asset when other assets are performing poorly.
Gold provides fast liquidity
As gold has become one of the most popular investments, there have been a plethora of platforms that allow you to buy or sell it with ease, making it easy for you to either convert your investment into cash or to sell it for a profit.
Investments that are highly liquid have the potential to be very beneficial to you financially. This is due to the fact that they allow you to access your money quickly, which is especially useful in emergencies when you need cash fast.
Gold is safe to handle
A gold investment is unlike investing in stocks or shares because it doesn’t require a huge amount of knowledge on your part. Therefore, once you have purchased your first ounce of gold, you will be able to get started and easily make profits with a stable and secure asset.
Gold is a tangible resource
Cryptocurrencies such as Bitcoin are completely electronic investments, meaning you own the shares, but they sit in your brokerage account as numbers. This makes them more suitable for traders who prefer tangible investments.
The gold we know of is a tangible asset, so it can be held in our hand (physical gold bullion) and stored in our preferred location. The gold’s tangibility has made it a popular investment choice. It provides a good alternative for intangible investments such as stocks when you want to avoid them.
There are a few risks to be aware of when investing in gold as it can balance your portfolio and hedge inflation.
Buying gold can be expensive
Investing in gold is not without its drawbacks, among which are the cost of the metal itself. In 2010, gold sold for about $1,100 per ounce. However, since then it has steadily increased, reaching above $2,000. It is this high price that makes investing in gold difficult for those just getting started.
Home storage of gold is difficult
Gold investments can include physical assets, which will require safe storage. For instance, gold coins or bars must be stored in a safe at home. They might also be stored with a storage company.
If you decide to purchase a safe or hire a company to do the job for you, you will have to spend money. Some companies charge an annual fee of 0.29% of the value of the gold they store. There is also a minimum monthly fee of $9.99.
No yield is offered by gold
A gold investment doesn’t offer any gains while you own it. It can only be profited from when you sell it to someone else. Therefore, gold is a speculative investment. However, it isn’t suited to all investment situations.
Assume you want to invest your money in a way that will provide you with a cash flow you can live off of. Unfortunately, Gold can’t offer this kind of income. Instead, you are better off investing in bonds or the stock market.
Investors can sustain a cash flow through dividends and interest payments, thus avoiding the need to sell their stock.
Exactly what is Bitcoin?
A decentralized currency that works as a quick form of payment, Bitcoin is considered to be an upgrade over existing bank transfers that take days to complete.
This cryptocurrency was introduced to the public by Satoshi Nakamoto, an anonymous developer. Since then, it has grown to become the most popular currency on the planet.
Cryptocurrencies like Ethereum, Tether, and Solana have been inspired by it.
What are the advantages of Bitcoin?
Bitcoin has a turbulent history, so it is important to know its benefits. This will help you decide if it’s a good investment option:
Liquidity and accessibility
A digital currency like Bitcoin is very accessible and versatile. Using Bitcoin in multiple countries with little to no fees makes it possible to spend money with no fees. You can transfer it globally within minutes and use it to pay for goods and services. Additionally, Bitcoin can be sold anytime, making your assets easy to move.
Transparency and anonymity
Bitcoin users are identified by numeric codes. They also have many public keys, making it hard to trace transactions back to users. Blockchain technology keeps transactions secure, despite the fact that they are visible.
Wallet owners only know how many bitcoins they have for added security. If there’s a breach, a new address can be generated. Unlike traditional banks, bitcoin wallets don’t require personal information from customers.
Freedom from centralized control
Bitcoin is a decentralized currency, which means that it is not regulated by any central bank or government. Authorities cannot seize bitcoins or freeze accounts.
Bitcoin is also not subject to government taxes, which gives users total control over their finances. It’s made possible thanks to the fact that the government isn’t involved.
Potentially high returns
The Bitcoin price can fluctuate daily and monthly. In March 2017, it was $975.70. It spiked to $20,089 in December 2017.
Investors and business owners are embracing Bitcoin because of its eventual profit if bought at low prices. Many believe that by 2025 it will be worth close to $500,000.
Despite an increase in users, cryptocurrency has substantial disadvantages:
Volatility is high in Bitcoin
Bitcoin’s price fluctuations can be both blessings and curses. Due to its limited number of 21 million, the cryptocurrency is scarce. Scarcity makes it very valuable, but also causes it to change unfavorably. The price of bitcoin is also uncertain due to concerns about its future value and security breaches.
The price fluctuation of Bitcoin in one year has been unprecedented. Bitcoin reached a high of $67K in Nov, 2021, but has seen a massive decline in value, going down to $20,604!
No government backs Bitcoin
As a decentralized currency, Bitcoin’s appeal can be countered by its downsides. Bitcoin transactions are not protected by law, unlike bank-regulated currencies.
This means if many investors sell their bitcoin together, its value will drop drastically. Other market users will also be affected and it can cause great financial stress.
Transacting with bitcoin is irreversible
Bitcoin transactions are final, which means you cannot do anything if the wrong amount is sent, or if the recipient is the wrong one.
By keeping your assets in a cryptocurrency wallet, you also risk losing everything. This is because you can lose everything if you forget the private key, or if a virus corrupts your hard drive.
What’s better: Bitcoin or Gold?
Bitcoin is highly volatile than gold, making it a highly risky investment that depends on your risk tolerance, investing strategy, and capital.
As a result, Gold has a solid reputation for protecting its investors’ money, making it a no-brainer investment.
Online gold trading
Bitcoin is an attractive currency, but gold gives a better sense of security for your assets. Its value will keep rising even if the economy deteriorates in 2023. Investing in gold is a great way to hedge against inflation as the world heads toward recession in At ISA Bullion, you can trade precious metals like online Gold trading, in real-time from anywhere in the world.
Join our app today and experience high-level trading with quality tools from anywhere.
Umar Nisar was born and raised in the busy city of Abbottabad. As a journalist, Umar Nisar has contributed to many online publications including PAK Today and the Huffing Post. In regards to academics, Umar Nisar earned a degree in business from the Abbottabad UST, Havelian. Umar Nisar follows the money and covers all aspects of emerging tech here at The Hear Up.