Gold vs. Bitcoin

In the first week of Oct. gold fell to $1200 an ounce, and this is expected to be a new bottom.  Silver broke out the upside and investors are waiting for gold to reach above $1,220 an ounce. In the September mid-weeks, investors poured a lot of money towards gold ETFs, about $34.3 billion, as per FactSet data. The total inflow in such funds is now up to $215 billion. Some believe the industry is consolidating. Some investors believe crypto currencies can replace gold one day. Is it possible?

Gold as an asset class

In terms of investment, one need to examine the asset class, vulnerabilities, functional framework, scarcity, demand / supply charts and various other micro economic factors. Gold is a safe haven for investors and in case, crypto replaces gold, the prices will reduce unexpectedly. Currently, as an investment class, gold accounts for 40 per cent of the total demand.

Analysts believe yellow metal will always remain a safe option, although, with change in time; there will be other options such as crypto currencies. In countries such as Venezuela and Argentina where inflation is very high and the fiat currency lost significant value, both options are working.

There is a lot of difference between the two investments

Gold represents physical asset and bitcoin is virtual. Digital coins or currencies or such document are completely dependent on internet based systems, which are highly vulnerable to cyber crimes.

There are no globally uniform regulations to handle crypto currencies, whereas, gold has always been adopted by investors as a standard in trade and has been widely used during financial or political uncertainty. It is highly sensitive to rates, where rising borrowing cost increases dollar value and gold price.  

Crypto currencies depict extreme volatility and if these are lost, by any means, there is no mechanism to get back the money.

There is no protection and no regulatory organization involved in delivering and securing the investor.

One cannot buy asset from bitcoins, whereas, gold can be used in exchange of money.

Currently there are more than 21 million digital currencies floating in the market and one requires proper analysis to get the real value of these digital coins.

Bitcoins are unlimited and cannot be mined. Gold on the other hand, has been so valued that it is a commodity and a scare currency which can be found on 0.003 part / million of earth’s crust. Listed companies and miners in gold are reducing and tougher securities have increased demand significantly in comparison to supply.  Some say, it can be found in mines, seawater and a few companies are establishing space mining to get gold. The expensive on gold mining increases its production cost, ultimately the cost.

The value of gold is unlimited and it has always, since 2000 years ago, provided value to the holder of physical asset.

In case of gold, one does not need to have knowledge of the changing technologies. Bitcoin traders should be able to identify the latest technologies, values, and change in trade behaviour and options in crypto currencies to increase their value.

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