For most people the financial market crisis that came by in 2008 is hard to forget. Though the consecutive periods can be considered as a bull market, but the sentiments have begun to sour now. For the US economy, the Dow Jones Industrial Average dropped and there are no signs that the drop would stop. Hence, for savvy investors, they need to get the right plans and strategies in place to hedge against such uncertainties and a drop in the market prices.
The traditional stance is always to hedge against such volatility by buying gold. This has indeed proven to be effective in the past, but there is a new alternative that today challenges what was considered a safe haven for the old schoolers. Bitcoin is a new asset that is flashy, but also has the stable properties that can contest any paper currency. Hence, it can be a viable haven for those who wish to lock their money in dependable assets with assured or stable market value.
About gold
Gold has certain advantages that stand in its favor and that has been the case for quite some time. Supply always remains low no matter how high the demand. That makes it valuable as an asset to hold onto. Nowadays, many financial agencies offer loans and similar instruments when one can provide gold as a guarantee against such debts. The inheritance value of gold makes it a preferred mode of investment for the long term for most people.
About Bitcoin
Bitcoin is as new as gold is old. This is a crypto-currency that is based or legitimized by Blockchain technology. There are certain properties that it shares with gold for which it is worth comparing. For instance, Bitcoin can be considered as digital gold as the supply of Bitcoin is limited. The current value of a Bitcoin is approximately $4000 and there was a time when an ounce of gold was cheaper compared to the price of a Bitcoin. The limited supply of Bitcoin which can be gained through mining or through transactions makes it valuable and scarce. The cap of this currency remains at 21 million.
Comparing the two
Gold has existed as a safe haven among the assets for hundreds of years. Bitcoin today comes in as a crypto-currency that is legitimate and popular in digital transactions. In many countries and regions it is also a legal form of currency to use side by side with paper currencies. Here are some points to consider when you are looking at the benefits of investing in Bitcoin or in gold in the present scenario.
Legalities, safety and transparency
These are some points in which Bitcoin takes the cake as compared to gold. For instance, the tracking, trading and weighing of gold suffers with cumbersome complexities though standardized parameters and certification bodies are present. Gold is difficult to corrupt, steal and pass off as real when it is fake gold. The same works for Bitcoin as well. One cannot corrupt or alter Bitcoin transactions as there are encrypted algorithms involved that record such transactions and make them irreversible and traceable. However, hacking and spamming activities do threaten online Bitcoin transactions from time to time.
Rarity
Just as gold is difficult to get more, but only through mining in certain areas and in limited amounts. Bitcoin however, will not be there anymore as it is estimated that the supply will exhaust in a time period of 10 years. With such scarcity levels, it has a higher valuation than gold. Hence, one would be better off getting their hands on Bitcoin now and save the supply of this currency for the price increase that it will have in future.
This is one aspect where the application of Bitcoin is not clear. Gold has physical uses in industry and jewelry making, but Bitcoin becomes usually a way to transfer value as well as an instrument with which speculations are done in the digital market. The currency works on faith based operations and legitimate encrypted and digital records that are maintained of such transactions.
Volatile nature of assets
If you compare the volatile nature of these two assets, gold is more stable while Bitcoin is a more volatile asset. As people consider this crypto-currency to be of value, its value rises in circulation. However, gold prices are more on actual supply of gold and not on speculative demands.
Liquidity
This is another aspect where one can see a difference in these two assets. Bitcoin exchanged for cash is a more difficult proposition than getting cash for gold. The market for Bitcoin is limited while gold has much more demand in markets worldwide and people are willing to pay a price for it.
Conclusion
For those who are looking at both these options when it comes to stabilizing their portfolio, gold remains a winner when it comes to crypto currency Bitcoin. Though the latter is becoming a legitimate option gold is a reliable and a long standing option here. For those who undergo digital transactions Bitcoin can be a viable option as well. It would be wise for modern investors to keep small amounts of both currencies in their accounts as the future remains opaque. Gold however, might have a competitor in real if Bitcoin is able to prove its worth over a longer time frame. Hence, investors will have a digital safe haven to consider besides the traditional asset that is gold. Many are intrigued by the concept of investing in a new form of currency that has no cost of creation but has grown over thousands of dollars in worth due to the legitimate nature that it has obtained. As digital transactions become more commonplace and hard felt currency is replaced by them in many instances, investors dream of a day when crypto-currency and its ownership would translate to wealth in digital world which can be used for purchase or showcase assets that one holds in their digital wallets.
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