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Should You Invest in Gold or Bitcoin?

Should You Invest in Gold or Bitcoin?

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March 2008 saw the huge crisis in the financial markets.  This year marks the 8th year of the financial upturn.  It has been a largely bullish market for investors. Despite the fact that we have seen oil soar, and then prices crashing to less than half last year, gold and Bitcoin have both soared in prices.  Bitcoin has eclipsed gold holding a value of almost three times the price of gold at the time of writing.

However, investors do question whether Bitcoin is a fad.  Both Bitcoin and gold are mined.  Bitcoin is intangible. It is a digital currency.  Gold is gold.  It has been the most precious and valuable metal since the “El Dorado”

However, the question remains.  Should you invest in Gold or Bitcoin?

Invest in Gold or Bitcoin? That is the question!

The price of Bitcoin has grown from $1000 average at the beginning of the year (2017) to $4000 in just seven months.  If we are looking at stellar investment, there is no question that whoever invested in Bitcoin a few months ago is sitting on a “Bitcoin mine”. The price of Bitcoin rose from $572 to $4289 in just one year.

invest in gold or bitcoin
Charts Source CoinBase.com

 

The price of gold has been fairly consistent for the past six months.  The current price hovering around the $1200 mark.  It seems that the upward trend we say in 2014 through to 2016 has become exhausted. There is no question that the price has remained stable and secure.

 

invest in gold or bitcoin
chart source Goldprice.org

Where is the Future Headed? Invest in Gold or Bitcoin?

In the past investors and portfolio managers have hedged against stock volatility by investing in Gold. Gold has also been the used as the underlying asset for Retirement plans and IRA’s. Gold investment has long been seen as the most secure method of planning your future and your retirement.

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However, today, we are seeing the emerging new sensational Bitcoin that is challenging the perhaps “old school” way of thinking.  Is gold really the best investment for your future?  Is it really the safe-haven that will protect the value of your present investment and take it to the future?

Bitcoin is a new asset.  Despite its extremely Bullish history, throwing every Matador out of its equation, it does remain very volatile.  It is a new asset and the world is only starting to warm up to crypto currencies and the whole BlockChain  Technology. The question is:

Has Bitcoin become the alternative asset that can reduce your exposure and should Bitcoin be part of your investment portfolio?

Invest in Some Gold? Or Invest in Some Bitcoin?

invest in gold or bitcoin

Gold has been regarded as a valuable asset since time immemorial. There is a record of the first interaction of Gold and humans that dates as far back as 3000BC.   The Ancient Egyptians prized gold as a valuable treasure.

It has led the Spanish Conquistadors to search the Americas for the glowing glory of gold.  It is the first asset to be used as a currency instead of barter.

Gold is still technically the asset that backs most currencies.  It does not include the Greenback and the U.S Treasury. Nixon had made sure of that in 1971. He had severed ties between gold as a base and the US currency – making money printing possible.Gold has always played an extremely important role in the history of world finance.  However, the question remains, is the value of gold real? How is the value of gold determined? Will gold remain the best asset to invest in future?

Naturally, whenever there is any nervousness surrounding political environments, investors revert to gold as a good asset to hold in their portfolios.

Gold and History

Gold has always played an extremely important role in the history of world finance.  However, the question remains, is the value of gold real? How is the value of gold determined? Will gold remain the best asset to invest in future?

Gold still remains a very important and valuable asset even in the use of consumer goods.  Gold is still used for jewelry as well as electronics  It is scarce and its supply remains scarcer than demand.  This is just one aspect of why you should invest in gold.  Gold needs to be mined.  It cannot be printed.

The price of Gold, therefore, does not depend on any political behavior or misbehavior.  The price is usually stronger at times of instability as investors flee currencies and turn to gold as a safe haven.

The Meteoric Rise of Bitcoin

invest in gold or bitcoin

Despite its notorious past, Bitcoin is now accepting mainstream recognition.  Bitcoin cannot be ignored and has become the flavor of the month.  Bitcoin is like gold, a decentralized currency.  It is a crypto currency that requires being “mined” and its movements are recorded on a block-chain. Bitcoin will have a limited supply of 21 million coins.  So far 17 million coins have been mined.  It is expected that all Bitcoin will have been mined by 2040.

As time goes by, the mining of Bitcoin becomes more complex and more expensive. Supply is therefore restricted.  As time goes by, if Bitcoin grows in safety, and in demand, the supply is going to dry up.  Therefore it is expected that the price of Bitcoin can go as far as $100,000 per coin in the next ten years.

Bitcoin is the first and therefore the more famous of crypto currencies. It has been around since 2009. Compared to gold, it is a new-born. This notwithstanding,

Many are now looking at Bitcoin as the new Digital Gold.

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Whether to Invest in Gold or Bitcoin – The Assets compared

#1 The ancient versus the Millennials

Comparing gold to Bitcoin would not seem significant just a few months back.  However, given the fact that cryptocurrencies and particularly Bitcoin are gaining so much confidence, then it is probably pertinent to make the comparisons.

If Bitcoin is becoming a potential and real threat to gold, then the question of whether you should be investing in gold or Bitcoin becomes a very important one.

Here are a few considerations that need to be accounted for when making the comparison between gold and bitcoin.

#2 Safety First

invest in gold or bitcoin

There is no question that the track record for gold has been nothing but pristine.  Whether it is safe as an investment seems to be beyond question.  However, it is not safe to hold in your pocket.  You do need to create a good way to store gold in bullion.  Pretty much like any other FIAT currency, gold needs to be stored in a safe place.

Bitcoin as a medium of investment is slowly creating a strong track record.  However, like Gold, holding it in safety has been an issue.  If you are a long term investor and want to buy Bitcoin to store for the future, then holding your Bitcoin online is not an option!  You do need to create a safe environment within which you will store your coins.

Whether we are looking at a safety deposit box for gold or an offline wallet  to safely store your Bitcoin the safety issue remains the same.

With Bitcoin, holding your assets offline is absolutely quintessential. This is especially so, if you are planning to buy a nice stash and sit on it until the price grows.  Online exchanges remain susceptible to be hacked.  The memory of Mt.Gox is still to fresh to overlook this security issue

Security is a key factor in determining whether to invest in gold or bitcoin.

#3 Ease of Transactions

Although gold has a great intrinsic value, you cannot go around shopping with gold.  You will need to go to a proper Gold exchange and get cash value for your gold before you can use it to purchase any other commodity.

Bitcoin, on the other hand, is an easy peer-to-peer payment method.  Holders of wallets (even with different Exchanges) can send and receive money in seconds and with virtually no cost, from the ease of their smart phones.

Furthermore, more and more companies are now accepting Bitcoin as a means of online payment. This now includes Amazon and PayPal.  Basically, if you hold a wallet and transfer coins online, you can pay for your travel arrangements, buy pizza, electronic goods, and even buy property!

Here is an article that may interest you with some teasing facts:  Monumental Bitcoin Transactions.

#4 Price Movement and Liquidity – Factors to determine whether to Invest in Gold or Bitcoin

For reasons already explained above, gold is far more stable than Bitcoin.  However, Bitcoin investors who have jumped in as early as the beginning of this year – are smiling all the way through!

Gold is mined – and there can be no known limit for the supply.  Bitcoin is mined but we know that it will be exhausted eventually. All the supply will be in hand, and only the demand and supply will determine the price.

Turning gold to cash is probably easier than turning Bitcoin to cash.  In order to turn Bitcoin to cash, you need to find a cash buyer.  Alternately you need to cash in slowly in Exchanges for cash. However, generally speaking, these Exchanges do impose limits. Notwithstanding this, as explained earlier, Bitcoin is easier as a gateway of payment than Gold.

These are important factors in your decision on whether to invest in gold or bitcoin.

CoinMama: Buy Bitcoins with Credit Card

Should you Invest in Gold or Bitcoin? Conclusion

So far there seems to be resistance to investing in Bitcoin for your portfolio for many reasons.  Usually they are related to the public in general not being able to understand how a digital currency that is intangible, can actually have a value at all.

The argument for Bitcoin can be explained as follows:

If the dollar is no longer backed by Gold but only controlled by financial and political “confidence” – who says that the same could not be said for Bitcoin?

Bitcoin like the Dollar is not backed by Gold.  However it is backed by the confidence of demand and supply.  It is not controlled by governments of political strategies.

What makes you more comfortable?

In the quest of finding the right answer as to whether to invest in gold or bitcoin – there is probably none.  Much depends on your risk appetite.  A lot more will depend on your knowledge of either.

Balance Your Investments – Invest in Gold and Bitcoin

In the face of declining confidence in currencies and in stock markets, considering the addition of either gold or Bitcoin could be a sensible strategy.  Gold remains one of the more stable and strong assets. Bitcoin is gaining a lot of confidence and weight.  If you are smart and can afford the spread, it may make sense to hold a portion of both.  Percentages will vary according to your portfolio mix.  Over-investing in any type of asset would not be recommendable as good financial and investment sense.  However, mixing the basket would be advice that in future could mean that you have a safe-haven in your portfolio.

Have you found this article of interest?  Please share and leave a comment

Penned by Mariella S.

Disclosure clause:  This article is the personal view of the author and is not to be deemed as investment advice.  The site also may benefit from affiliation rewards from supporting Exchanges.

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Comment(7)

  1. Thanks for the informative article Sheriff. I’ve been doing alot of research on investing in Gold or Bitcoin and this helped alot. I really do like Bitcoin as an investment opportunity and it has some huge predictions for the future.

  2. Interesting, I was in fact looking information as to how to trade bitcoin and gold so I really appreciate the article.

  3. Thanks Sheriff,
    Your articles are always a pleasure to read. Thanks for the Information i was looking to invest into BTC, and your point of view really helped me to take some important decisions.
    Keep up the good quality and thank you once again!

  4. Great in-depth article! I’ve been looking for a good source of information on how to get into investing in these new alternative coins such as bitcoin. Your point about the dollar value also only being based on ‘financial and political “confidence”’ is very true!

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