Gold vs Bitcoin - ngulikenak.net

Gold has always been an alternative asset class. Whenever people lose faith in the value of the stock they hold or even in the value of any currency, they usually sell their holdings and invest the proceeds in gold. However, of late, Bitcoin has exploded. Gold is no longer the only place where money can be “parked” in times of crisis. If you are confused about choosing between gold and bitcoin, maybe this article can help!

Bitcoin Hype

Bitcoin has become an alternative in recent years. However, many critics believe that Bitcoin is probably the biggest bubble the world has ever seen. It is often compared to Tulip mania in terms of scale.

However, that doesn’t mean you shouldn’t invest in bitcoin. Bitcoin is still one type of investment that you can rely on. Investing in bitcoin can indeed provide great profit opportunities, but the risks are much greater than investing in gold. If you are a trader who likes to take big risks, maybe bitcoin can be an option!

Why is investing in bitcoin so much riskier than investing in gold? Let’s see!

Tangibility

The first and foremost difference is that gold is a physical commodity. Investors can touch and feel it. On the other hand, Bitcoin exists only in the digital world. It doesn’t exist in reality. It is almost impossible to reduce the purity of gold or damage the metal. On the other hand, Bitcoin is largely unregulated. Therefore, it is open to manipulation. The fact that there is no regulatory body that regulates Bitcoin makes it even more vulnerable to fraud.

It is no coincidence that Bitcoin has rallied so much in the past. This creates the illusion that prices are going up and people are starting to follow the investment hype. This is not wrong, but it takes care to control risk. Some of the big traders could just throw away their holdings. The bottom line is that Bitcoin is very difficult to track and easy to manipulate due to its unregulated market.

Liquidity Preference

Alternative asset classes are all about liquidity preference. In simple words, what do you want to hold on to in the event of a crisis, gold or Bitcoin? The answer to this question is golden in most cases. Gold has a long history of surviving crises. It has been used for centuries by various civilizations.

Whenever the value of fiat money goes to zero, gold becomes the default currency. This decision was not taken by any government. Instead, it is taken up by the market itself. Even amid a crisis like Venezuela’s hyperinflation, gold can still be exchanged for goods and services! Bitcoin is relatively new and has no record of successfully navigating crises.

Stability

The value of gold has been more or less stable over the years. There are indeed price increases and even decreases in prices. However, nothing is quite as dramatic as Bitcoin. Over the past few days, Bitcoin has increased tremendously in a relatively short period! This may be one of the attractions for traders who like big risks.

Therefore, Bitcoin is not a stable store of value. Prices go up and down very quickly. As a result, the amount taken by investors may be very different from the amount they originally invested in Bitcoin.

Energy Consumption

The biggest question mark surrounding Bitcoin’s existence is its energy efficiency. Bitcoin is a disaster in terms of energy consumption. The energy generated by burning 12 barrels of oil is used to mine one Bitcoin! Currently, all Bitcoin mining activity in the world consumes more energy than in Nigeria, which is a country of more than 90 million people.

When mining activity increases, it is expected to consume more energy than Japan which is the second-largest economy in the world. This is a big drawback of the Bitcoin model. The world is running out of energy. It would not be wise to divert energy from basic human needs toward processing financial transactions. On the other hand, gold has no such problems. Gold mining does not consume excessive energy.

The bottom line is, that investing in bitcoin or gold has its advantages and disadvantages. If you are a trader who likes to speculate in the market and like big returns and risks, maybe bitcoin can be an option. If you choose to invest in safe-haven assets that have a clear history, gold is the most appropriate choice.