Bitcoin vs Gold: Which Should You Buy Gold or Bitcoin?
There is a special place for gold in every Indian family as no function, right from marriage to child birth, is complete without a gift of gold. People buy gold to make jewellery or as an investment like real estate or stocks. People believe that gold is savior in difficult times. During period of recession, the traditional way would be to use gold as a hedge against stock market volatility.
When inflation rises, value of currency goes down so investors keep cash in the form of gold. Therefore, in times when inflation remains high over a longer period, gold becomes a tool to hedge against inflationary conditions. For years, gold is considered as safe haven.
Bitcoin is the most valuable cryptocurrency in the world. Known as “digital gold”, bitcoin has given better return in last two years as compared to gold.
Also Read: 9 Investment Options in India
Why should you invest in gold?
- Gold has been considered as a safe and reliable investment from thousands of years. It acts as a protection in difficult times.
- Gold cannot be manufactured. Company can issue new shares, government can print new currencies but gold can only be mined.
- Gold becomes a tool to hedge against inflationary conditions.
- Since we’re living during a time with a lot of market volatility, it can make sense to have a portion of your portfolio allocated toward gold.
- There are several ways to purchase gold like buying physical gold jewellery or gold coins, or gold equities or exchange-traded funds(Gold ETFs).
Why should you invest in bitcoin?
- Bitcoin is a blockchain-based cryptocurrency that shares some properties with gold.
- There is limited amount of bitcoin. Satoshi Nakamoto, the creator of bitcoin has limited the total supply of bitcoin. There will only ever be a maximum of 21 million Bitcoins in circulation.
- Bitcoin is also mined. Cryptocurrency mining is the process of releasing a cryptocurrency from the total supply. It validates transactions and mining new coins from the block.
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Gold vs Bitcoin: Comparison of Gold and Bitcoin
| Gold | Bitcoin |
| Its hard to steal gold or corrupt the metal. | Due to its complicated algorithm, its difficult to corrupt cryptocurrency. |
| Gold is considered as safer option of investment. | Safety is not yet in place. Example is bitcoin exchange, Mt Gox. Bitcoins worth more than $450 were stolen straight out of the Mt. Gox hot cryptocurrency wallet over time, beginning in late 2011. |
| Gold is rare. Means, it cannot be manufactured. It is mined. | Bitcoin is also rare as there will be 21 million Bitcoin out in circulation by the year 2140. |
| Gold investment is liquid. Means investor can convert gold investment easily into cash. | Bitcoin investment is also liquid. |
| Gold investment is less volatile as compared to bitcoin. | Bitcoin investment is volatile. In the beginning of 2018, bitcoin reached the value $20,000 per bitcoin and next year it came down to $4000. |
| Gold is ultimate currency of central banks. | Cryptocurrency was invented to provide an alternative payment system that would operate free of any central control can be used just like traditional currencies. |
| Gold has given good return in last 10 years. In 2010, 10 gram of gold was costing Rs 18,500 and it was Rs 48,651 in 2021. | Bitcoin has given more annualised return than gold in last 10 years. |
| Investor can hold gold in hand, store in home or bank locker. | Bitcoin is virtual. |
| Investor can’t carry gold everywhere or cant sell fraction of it. | Bitcoin is virtual so investor doesn’t need to carry it. Bitcoin can be sold in very small fraction and within few seconds. |
Takeaway:
Both bitcoin and gold investment have their own advantages and disadvantages. It depends upon the financial goals of investor. Bitcoin is volatile and price of bitcoin is subject to market news. Price of cryptocurrency goes up and down quickly based on news. So, gold is considered safer option. But bitcoin has given high return in comparison with gold. And many experts believe that it will give more return. There will only be 21 million bitcoins in circulation, so no bitcoins can be created then. And if demand increases then value will increase due to fixed volume asset.
