Both gold and Bitcoin are pretty much the same. Both of the assets are limited in nature, and they run independently without the interference of the government. Also, Bitcoin is said to be digital gold. But when it comes to investing in any of these assets, which one should be chosen?
Both gold and Bitcoin are considered to be a great way to invest your money. But if you are someone who is only planning to invest in one of these two assets. Then the below guide will help you out:
Regulation:
Unlike Bitcoin, gold is something that can be seen, touch or feel. It is not a virtual thing, and it has established a system for trading, weighing, and tracking over the years. Gold is hard to fake or steal. Also, it is highly regulated.
In many countries, you are not allowed to cross borders while crying gold without regulatory permission. Also, when you are investing in gold, you will have to purchase it from registered dealers and brokers. Also, it is advised that you should only buy hard gold if you can store it somewhere safe.
However, on the other Bitcoin is also pretty tough to fake or steal. Bitcoin uses an encrypted and decentralized system. But yes, Bitcoins get hacked, and there is no doubt about it. But you can always use a hardware wallet to store your assets.
Moreover, when it comes to carrying your Bitcoin from one country to another, you won’t really face any issues. As everything is virtual. However, Bitcoin or any other cryptocurrency is not well regulated. As a result, buying or selling it in some regions is a challenging task. But yes, there are numerous ways to do so.
Utility:
When it comes to utility, over the years, gold has been used in many different applications. It is used as a currency, luxury item, specialized items, and more. Also, it has a cross functional utility which gives gold the ability to maintain its value when other asset values fall.
However, when it comes to Bitcoin, it is limited in its utility. You can only use it as a digital currency or an investment option.
But thanks to the newer DeFi technologies based on blockchain, Bitcoin can be used in various ways. One of such new findings is that Bitcoin can be used for lending and borrowing. You can use your Bitcoins to get a crypto loan in USD, CAD, or any other fiat currency.
Also, Bitcoin has the potential to be used in various applications, just like gold. But since it is a virtual currency and the crypto market is extremely volatile, financial institutes might not think of using Bitcoin to replace gold or use it in any applications.
Liquidity:
One of the main concerns of the investors looking ahead to invest in Bitcoin is its liquidity. In general, cryptocurrencies are very liquid assets. However, it might not be the case. There are certain times when cryptocurrencies might be more liquid than any other asset and vice versa.
For instance, if you have a couple of hundred Bitcoins, then you will face a hard time liquidating your funds in a hurry. Most exchanges have a limit on how many Bitcoins or funds you can withdraw in a day. For instance, Coinbase only allows up to $50,000 liquidation of cryptocurrency per day.
In case if Bitcoin’s price is higher than the daily limit allowed by your exchange, you will have to sell your funds in a small amount. This will also charge high transaction fees, and you won’t really enjoy the process of liquidating your funds.
Also, since the crypto market is extremely volatile. You might want to sell off your funds when the price of Bitcoin is falling rapidly. And thanks to these exchange withdrawal limits, you won’t be able to do so.
However, if you are a small investor, then these things shouldn’t worry you. But make sure to know your exchange’s daily withdrawal limit.
Volatility:
The crypto market is extremely volatile, and there is no doubt about it. This is what makes Bitcoin and other cryptocurrencies a highly risky asset to invest in.
Bitcoin is subjected to media effects, hype, investor sentiment, and regulatory actions. News about the digital currency could prompt investors to panic and make quick decisions. And this is what makes Bitcoin’s price fluctuate.
However, when it comes to gold, the media doesn’t really have an effect on it. As over the years, gold has established trustworthiness. Plus, many financial institutions use it. Hence, investing in gold is a much more safe option.
Also, in the last couple of years, many alternative cryptocurrencies have been launched. These new coins aim to offer more stability compared to Bitcoin. These coins are called stablecoins because their prices are pegged to fiat currency or other stable assets. For instance, USDT is one of the popular stablecoin whose value is pegged to the US dollar.
Ease of access:
When it comes to accessing any of these assets, they are pretty easy to get. For Bitcoin, you will find several cryptocurrency exchanges online, which makes it super easy for you to buy or sell crypto. Similarly, gold has an established way of trading.
However, if you talk about which one is easy to invest in. The answer would be gold, as there are many different ways available. Like you can purchase physical gold, ETFs that own physical gold, or gold companies. Or you can trade futures.
On the other hand, you can easily purchase Bitcoin through crypto exchanges and now through traditional brokers if they don’t mind the broker having custody of the cryptocurrency. However, if you insist on taking custody of your own coins, then you need to use an exchange or an intermediary that allows it.
However, one of the biggest issues with Bitcoin is to keep it safe. We have heard about several exchanges being hacked. And when such a thing happens, you might end up losing all your funds. But yes, you can use a hardware wallet for the job.
Is Bitcoin a Better Investment Than Gold?
The answer to this question would depend. It completely depends on your investing strategy, how much capital you wish to risk, your risk tolerance and how much you can afford to lose.
Do remember the fact that Bitcoin is highly volatile as a result it can make you face a huge loss and similarly you will enjoy huge profits. On the other hand, Gold is a safer option but it might not offer you as much return as Bitcoin would do.
Final Words:
So that was a quick comparison between Gold vs. Bitcoin. Both of the assets are highly profitable, and it requires you to have the patience to make money out of them. I would recommend you to do deep research about both and then come to a conclusion about which asset you wish to invest in.
