31 October 2022

Bitcoin Vs. Gold: What Is The Better Investment?


The increasing popularity of bitcoin has caught the interest of many investors, leading to the debate of Bitcoin vs. Gold investment. Many are wondering whether bitcoin can act like gold in an investment portfolio

On one hand, Gold has been a haven asset and inflation hedge for thousands of years. But Bitcoin can’t be overlooked as its price keeps climbing. Therefore, it’s easy to get confused over which one is better.

Therefore, we’ll examine both to analyze the financial benefits they both offer and their possible drawbacks.

What is Gold Investment?

Gold Coins and Bars for Investment

Investing in gold means buying and trading gold coins or bars. Investing in the equities of precious metal mining companies is also possible. This is for investors interested in the stock market who want gold exposure. 

Others might want to diversify their portfolio by buying a gold ETF. This is already backed by gold and doesn’t require ownership of gold bars. It doesn’t provide dividends, but returns come as the ETF appreciates.

Advantages of Gold

Buying gold can have several advantages under the right conditions:

Gold acts as an Inflation hedge

Advantages of Gold Investment

Purchasing power decreases with the rise in inflation. This makes it pointless to hold cash because you’ll keep losing money. Gold fixes that problem. As inflation goes up, the value of gold increases. This is a good incentive to move some cash into the precious metal. 

Gold provides an opportunity for diversification

Benefits of Investing in Bitcoin

Some investors buy gold as a key asset for building a diverse portfolio. Instead of having all your money in one asset class, spreading it around will help you manage risk. In addition, gold can help you make a profit when other assets are performing badly.

Gold offers you quick liquidity

Gold has risen to become a popular investment option. As a result, there are lots of platforms where it can be easily bought or sold. This makes it easy to convert your investment into cash when necessary.

Highly liquid investments are financially useful. This is because it gives you quick access to your invested money. In addition, it’s a valuable feature in emergencies when you need funds.

Gold is easy to handle

Secure Your Wealth with Gold Investments

Unlike stocks and shares, gold investments don’t require extensive knowledge. This means you can get started once you buy your first ounce of gold and easily make profits from a stable and secure asset. 

Gold is a tangible asset

Gold as a Hedge Against Inflation

Some traders prefer to invest in tangible commodities they can see. Modern investments like stocks and cryptocurrencies are purely electronic. This means you own the shares, but they’re just numbers in your brokerage account.

But gold is a tangible asset. This means it’s possible to hold it in your hand (physical gold bullion) and store it in a preferred location. Gold’s tangibility makes it an attractive option for investors. It’s a good alternative when trying to avoid intangible investments like stocks.

Disadvantages of Gold

Gold can balance your portfolio and provide inflation hedges. But, there are risks to watch and be aware of:

Gold can seem expensive

Comparing Bitcoin and Gold as Investment Options

A major drawback of gold investment is the cost of the commodity itself. In 2010, gold cost about $1,100 an ounce. However, it has kept climbing from that point, reaching above $2,000. That high price makes investment difficult if you’re starting.

Gold is difficult to store at home

Your gold investment might include physical assets, so you’ll need a way to store them safely. For example, if you own gold coins or bars, they must be stored in a safe at home. They might also be kept with a storage company. 

In either case, buying a safe or hiring a company costs money. Some companies charge an annual rate of 0.29% of the value of stored gold. There’s also a minimum charge of $9.99 per month. 

Gold offers no yield

Gold doesn’t offer any gain while you own it. The only way to profit from the commodity is by selling it to another person. This makes gold a speculative investment. But, it also means that it’s not suitable for every investment situation. 

Imagine you want to invest your money to produce a cash flow you can live on. Unfortunately, Gold won’t be able to provide that income. Instead, you stand a better chance of investing in bonds or the stock market. 

This is because they produce cash through dividends and interest payments. Traders can use this to sustain a cash flow without selling off their investment.

What is Bitcoin?

Bitcoin’s Decentralized Nature

Bitcoin is designed to act as a decentralized currency and works as a quick form of payment. It’s considered to be an upgrade over existing bank transfers that take days. 

Bitcoin was first introduced to the public in 2009. This was courtesy of an anonymous developer using the name of Satoshi Nakamoto. Since then, it’s become the most popular cryptocurrency in the world. 

You can purchase it on several exchanges. The currency has also inspired the creation of other cryptocurrencies like Ethereum, Tether, and Solana.

Advantages of Bitcoin

Bitcoin has a turbulent history, so it is important to know its benefits. This will help you decide if it’s a good investment option:

Accessibility and Liquidity

Benefits of Investing in Bitcoin

Bitcoin is a very accessible and versatile digital currency. You can transfer it within minutes worldwide and use it to pay for goods and services in many parts of the world. This makes spending money in multiple countries with little to no fees easier. As a bonus, Bitcoin can also be sold anytime, ensuring your assets are easy to move.

User Anonymity and Transparency

Although not completely hidden, Bitcoin users are identified by numerical codes. They also have many public keys, which make it difficult to track transactions back to users. Despite transactions being visible, blockchain technology keeps them safe.

Only the wallet owners know how many bitcoins they have for added security. If there’s a breach, generating a new wallet address is possible. Compared to traditional banking systems, you don’t need to provide personal information. This increases user privacy.

Independence from a central authority

Gold as a Hedge Against Inflation in Investment Portfolios

Bitcoin exists as a decentralized currency. This means a central bank or central government does not regulate it. It also means authorities won’t freeze your account and seize your coins. 

There’s also no way for Bitcoin to be taxed by the government. This gives users total control over their finances. It’s made possible because there’s no connection to government policies. 

High return potential

Gold ETFs and Physical Gold Investment

Bitcoin prices can be volatile, changing on a daily and monthly basis. For instance, the cryptocurrency was priced at $975.70 in March 2017. It spiked to $20,089 in December of the same year. 

This high volatility can also lead to increased returns. Many investors and business owners are adopting it. This is because of its eventual profit if bought at low prices. There’s still the belief that Bitcoin will gain long-term value and be worth close to $500,000 by 2025. 

Disadvantages of Bitcoin

Now comes the crucial part! Despite an increase in users, there are considerable disadvantages of cryptocurrency:

Bitcoin is highly volatile

Bitcoin Transactions vs. Gold Trading

The price fluctuations of Bitcoin can be a blessing and a curse. The cryptocurrency’s limit was set at 21 million, which makes it scarce. This scarcity makes it very valuable but also causes it to change unfavorably. Bitcoin’s price is also uncertain about its future value and security breaches. 

If you take a look at Bitcoin’s price fluctuation in one year, it has seen an unprecedented decline. Bitcoin saw a high of $67 K in Nov 2021 but has seen a massive decline in value going as low as $20,604!

Bitcoin has no government backing

Bitcoin’s Decentralized Nature

Being a decentralized currency can look attractive, but also has its downsides. Unlike bank-regulated currency, Bitcoin transactions don’t have legal protection. Another issue is that there’s no guarantee of minimum valuation. 

This means if many investors sell their bitcoin together, its value will drop drastically. Other market users will also be affected and it can cause great financial stress. 

Bitcoin transactions can’t be reversed

Comparing Bitcoin and Gold as Investment Options

Transactions done through Bitcoin are final. This means you can do nothing if the wrong amount is sent. You also can’t do anything if it’s sent to the wrong recipient. 

You also risk losing by keeping your assets in a cryptocurrency wallet. This is because you can lose everything if you forget the private key. In addition, if a virus corrupts your hard drive or wallet, your funds can be completely gone in minutes. 

Bitcoin or Gold: Which is the Better Investment?

Bitcoin vs. Gold Investment: Pros and Cons

Your choice depends on your risk tolerance, investing strategy, and capital. For example, Bitcoin is more volatile than gold, making it a highly risky investment. 

On the contrary, Gold has a solid reputation for protecting its investors’ money. Based on this alone, your investment choice should be a no-brainer.

Trade Gold Online with ISA Bullion

Bitcoin is an attractive currency, but gold gives better reassurance for your assets. This is because its value will keep rising even during uncertain economic situations. With the world heading toward recession in 2023, it’s wiser to invest in Gold as a powerful hedge against inflation.

At ISA Bullion, we provide easy access to the commodity market so you can trade precious metals like Gold and Silver in real time. We let you lock in Gold profits instantly from anywhere in the world. 

You can also use our app to make investments easily from any location. So sign up today and experience high-level trading with quality tools. 

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