Things To Consider When Investing In Bitcoin Vs Gold

Which is the better investment, bitcoin or gold? It’s an increasingly common question asked more and more among both newbie and experienced investors.

Bullion.Directory News 19 September, 2020
By Alison Macdonald
Commercial Editor at Bullion.Directory

The debate makes sense. Both commodities bring benefits – and obviously we at Bullion.Directory think it’s a good idea to own gold, given that countries around the globe are pumping money into their economies through a variety of different money-printing exercises. Gold is also consistently on an upward trajectory in terms of value, with gold seeing an average annual growth of 9% over the past 45 years.

Bitcoin, on the other hand, is another investment type that gives investors many of the same benefits as gold – and in several key respects with even greater potential for upside.

Bitcoin, just like gold is now being viewed as a safe haven during bear markets and recessions. No wonder more and more people are spending money to acquire this commodity today – especially given the abundance of easy to follow how-to information that services such as Crypto Head bring to the party. These are different times from back when investing in Bitcoin was a difficult process involving the dark web, complicated wallets and a good deal of risk. (Crypto Head carries a lot of useful information on just how easy it now is to purchase bitcoin)

If you’re still on the fence whether to invest in bitcoin or gold, here are five considerations that can help you decide:
 
 

1. Supply

 
Both bitcoin and gold are scarce. Unlike traditional currencies that governments can simply make, bitcoin and gold have limited supply.

In fact, the value of gold is determined as per the supply and demand of the commodity. As every other commodity, the demand and supply of gold are also determined by various economic factors. The demand of gold can be estimated in two ways: first, it’s from the point of view of the demand of gold for personal consumption, and, secondly, from the point of view of the demand for gold as a financial asset.

There are also growing demands for a return to gold’s use as a money form, determined through the process of economic gold standard. Similarly the technology behind Bitcoin and other cryptocurrencies is being discussed by central banks to form a new currency.
 
 

2. Authenticity

 
With bitcoins, there are no central servers, like in the stock market or any similar systems. All transactions are carried out by people using their computers.

They transact with different sites that accept cryptocurrency payments through their computer systems. That’s because it only takes seconds to verify bitcoin’s authenticity on the blockchain.

On the other hand, there are multiple ways you can purchase physical gold. The most common way is to buy it from online stores or local retail units where you can choose from a wide range of bullion bars, rounds and coins.

You can also purchase gold from a local jewelry store that has a license to sell precious metals – and there now exist several companies selling investment-grade 24k bullion jewelry. However, before you buy or invest in gold anywhere, make sure that the source is genuine and what you’ll be receiving is authentic gold. Fake gold bars and coins are increasingly common and can be very hard to tell from the real thing, unless you have specialist tools.

Verifying precious metal’s authenticity can be expensive and takes a much longer time than the instantaneous result you get with bitcoin.
 
 

3. Transferability

 
What’s transferability? Well, it’s the ability to have a transaction done without having to give any of your financial information to the other party involved.

It’s all about the convenience and security of transferring a commodity or an asset, like gold or bitcoin. The reason why transferability is important is because it means that there’s no risk of getting scammed while dealing with digital currency. That also means you won’t have to waste much time and money when sending something to someone else.

The web has become the world’s largest marketplace for the trading of digital currencies, such as in the case of the virtual currency known as bitcoin. It was created by a person using the alias ‘Satoshi Nakamoto,’ who released the first official version of the software for the purpose of making it possible to trade in and exchange currencies online. Since then, there have been other people who’ve emerged to take advantage of the opportunity created by this new technological development, leading to the further improvement in the way bitcoin is transferred.

On the other hand, while gold and other precious metals can be physically transferred, the process isn’t always easy or safe especially over distances and between countries. Where bitcoin can transfer from anywhere in the world to anywhere else in moments, transferring gold, particularly bars, from one place to another requires high-level security, insurance and carries risk of confiscation in certain countries with an import ban.
 
 

4. Liquidity

 
Many people have heard about the recent surge in the price of bitcoin. But, a lot of people don’t understand how to profit from this boom.

There are a few ways people can profit from the price increases in the digital currency, and many people are discovering the true potential of this new technology. One of the best ways to profit is through the ability to buy and sell the digital currency with ease.

The global market liquidity of a particular asset is its ability to buy or sell an asset without affecting the other sides of the transaction. In the case of gold, high liquidity means that more than a few parties are interested in taking the other side of the transaction.

However, when a country suffers a recession, there’s less money to be made in the country’s economic activity. In the United States, this may mean that there’s less gold being produced. A perfect example is during Covid19’s lockdown, where supplies of gold and silver from mine to refiner and wholesaler to dealer are in very short supply. For that reason, gold buyers may want to hold on to their gold for a while before making any transactions, which definately hits liquidity.

When you compare gold to bitcoin, the process of buying and selling the former can be more cumbersome and costly. Between the two, bitcoin is, by far, more liquid.
 
 

5. Legal Tender

 
Bitcoin, which stands for ‘digital cash,’ has become very popular as a means of money. This currency is based on the Internet, and all transactions are carried out electronically.

In the early days, this currency wasn’t widely known, but, in recent years, it has become a widely accepted method of exchange among millions of people worldwide.

For these reasons, the legal tender of many countries has been affected by the growth of bitcoin and other cryptocurrencies – and the internet as a conduit. While the U.S. dollar and other countries’ currency can be easily traded over the web, the laws governing the currency itself are already changing to reflect this type of electronic trading.

On the other hand, while there are forms of gold legal tender such as American Gold Eagles and American Gold Buffaloes, these are rarely if never used in purchasing goods and services. That makes bitcoin a better legal tender substitute compared to gold.
 
 

The Bottom Line

 
Considering the factors tackled above, one could conclude that bitcoin is a better investment in terms of liquidity and cash-equivalent use.

However, both bitcoin and gold are assets that investors can’t overlook. Bitcoin investing has advantages, but adding gold, especially tax efficient gold such as that held in a gold IRA to your investment portfolio comes with benefits, too. Gold also has millennia of history on it’s side.

Ultimately, the choice boils down to your current needs.

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