Gold or Bitcoin: Which is a better investment option?

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Covid-19 pandemic has taught us many lessons about a number of aspects of life, but the most important one was about the investment of our hard-earned money because savings accomplished due to returns generated after making wise and calculated money decisions were the ones which saved many of us during the tough period of lockdown related restrictions, and kept running our bread and butter that too without any compromises with daily expenses.

What we have witnessed during the pandemic is that people moved towards safe-haven assets. Investments in gold have given good returns to investors but diminishing the shine of yellow metal, cryptocurrency has given even better money returns than gold. And, that is why cryptocurrency is the new hot cake in terms of investment.

Earlier, the traditional move was to hedge against stock volatility with gold, and this proved to be an extremely effective method in the past, but a new alternative has emerged which is challenging the old-school safe-haven method.

What speaks in favour of Gold?

The yellow metal is valuable as a material for consumer goods such as jewellery, and it is not in abundance. Also, regardless of the demand, supply remains disproportionately low. Gold cannot be manufactured like that only. A company can issue new shares, the federal bank can print dollar bills but there is no such case with gold. It must be dug up from the ground and processed.

What speaks in favour of cryptocurrency?

Bitcoin is a blockchain-based cryptocurrency that shares some properties with its gold counterpart. In fact, many have called bitcoin “digital gold” in the past due to its weak relationship with all other assets—stocks especially. Like gold, there is a limited amount of bitcoin.

Compatibility Compared: Gold and cryptocurrency – All you need to know

On the basis of legality, transparency, safety, gold ranks above cryptocurrency. In terms of rarity, both are rare. Gold and bitcoin cryptocurrency both have good liquidity in the market. Talking about volatility, bitcoin is much more volatile as compared with gold. The yellow metal has a long history and lesser volatile than bitcoin. The precious metal has unmatched accessibility to people of all economic standing and technological knowledge. Most importantly, gold is the ultimate currency of central banks.

Final Verdict: Gold vs Cryptocurrency

Bitcoin has registered 100x improvement over gold as a store of value. The world is realising this and beginning to reprice digital currency in real-time. Although bitcoin has increased over hundreds of per cent in the last few months, but it is likely to continue appreciating in US dollar terms over the coming years. Maybe, bitcoin’s market cap will surpass gold’s market cap by 2030. Both gold and cryptocurrency have their own merits and demerits and it all depends on the sole discretion of an investor where he/she wants to invest.

(The writer is vice chairman at GCL Securities; views expressed are personal)