Investment trends come and go, but cryptocurrency appears to have developed some staying power. Retailers are even accepting forms of this digital currency as point-of-sale payments. It leads one to wonder if maybe it’s time to go all-in with crypto.
Of course, it’s also become difficult to not take note of gold’s meteoric rise. With its value up more than 50% between 2015 and 2020, it’s obvious that this precious metal is on its own run. This leaves many investors asking, “should I invest in gold or cryptocurrency?”
Everyone’s investment needs are different, so it’s difficult to pigeonhole people’s ideal market decisions into a single answer. After reading the following guide, though, you’ll be far more prepared to decide whether investing in gold or cryptocurrency is right for you.
What’s the Big Deal with Gold and Cryptocurrency?
Anyone who attempts to count the number of investment options available would have a never-ending task on their hands. This raises an important question: Why is everyone so focused on gold and cryptocurrency right now?
Sure, you could look at the risks and rewards of both assets and decide based on that alone. When you’re putting your money into something, though, it’s better if you’re fully informed of what’s going on. After reading the following section, you will be.
Why is Gold Trending?
One need only look at the live gold price to understand why there’s currently so much buzz around the precious metal. While its value can fluctuate over days, weeks, months, and especially years, there’s no denying that an upward trend has been prevalent.
We can go back to the 1950s and see a price per ounce of around $250, but it’s far more impressive to see the $2,000 mark that was reached in 2020. Gold has always held value to the human population, but it’s quite apparent that it’s reaching new heights almost every year.
On top of that, the Federal Reserve recently printed trillions of dollars to help the economy. This essentially devalues every existing dollar, so people are more committed now to hedging against a poor economy & currency depreciation than ever before.
Why is Cryptocurrency Trending?
Ever since Bitcoin exploded in popularity – and value – cryptocurrency has been on the tip of everyone’s tongue. Anyone who bought $1,000 worth of Bitcoin in 2013 was sitting on a $400,000 nest egg by 2017. And in the world of crypto, Bitcoin wasn’t the only success story.
Dogecoin became extremely popular when millions of retail investors entered the market during the COVID-19 pandemic. A $1,000 investment in this digital currency in May 2020 was worth $360,000 in May 2021.
These successes have put all the following cryptocurrencies on people’s radars:
- Shiba Inu (SHIB)
- Ethereum (ETH)
- Litecoin (LTC)
- Cardano (ADA)
- Polkadot (DOT)
- Stellar (XLM)
- Chainlink
Investment success stories can thrust any asset into the international narrative. And while insanely high profits may seem like a reason to choose cryptocurrency over gold, this is only a tiny part of the story.
There are pros and cons to getting involved in both these investments. Once you recognize the risks and rewards of each, you’ll be able to make a more informed decision. And although no one can predict the future, you’ll probably walk away with a yellow-tinted metal in mind.
Pros and Cons of Investing in Gold
Choosing to invest in gold or cryptocurrency requires an in-depth look at both assets. With the former, there are major considerations to account for. For instance, buying gold bullion bars differs greatly from buying gold collectible coins.
simply knowing the general benefits and disadvantages of investing in gold will get you on the right track.
Pros of Investing in Gold
- Inflation Hedge: During the Great Depression, the price of gold increased nearly 70 percent over just a five-year period. Gold can hedge against inflation and other market downturns.
- Store of Value: People have viewed gold as precious throughout history. There’s never been a point where it’s not been valuable, so it will always have some worth.
- Tangible Asset: Did you know that $140 billion in Bitcoin is just gone thanks to lost “wallets” and forgotten passwords? Gold is a tangible asset you can hold in your hand. You can’t forget that password.
- Confidentiality: There’s no public record that you have any amount of gold, and there’s certainly no record of where you store it.
- Transferability: There are no major issues related to transferring gold to heirs or other investors. You can sell it like any other property. It’s also highly liquid, so you can exchange it for money whenever you want.
- Constant Demand: Do you remember a point when there’s been no demand for gold? That’s because it doesn’t happen.
- Universal Value: Unlike fiat money, gold holds a universal value no matter where you are in the world.
Cons of Investing in Gold
- Premium Costs: Thanks to costs related to mining, transportation, dealers, and other essential functions, you’re unlikely to pay the spot price for gold. There’s always a premium attached.
- Paper Gold is Misleading: Investing in “paper gold” (e.g. gold ETFs, gold futures) seems easy, but it doesn’t always track the actual price of gold. Owning physical bullion is advisable.
- Potential Loss: If physical gold gets stolen from your home, you may have difficulty getting it back. This makes a precious-metals storage facility ideal.
- No Passive Income: Unlike some stocks and other assets, gold doesn’t offer a passive income. You make money when you sell it. Digital currency also offers no passive profits, though, so investing in gold or cryptocurrency is similar in this area.
Pros and Cons of Investing in Cryptocurrency
Before you start purchasing gold with your Bitcoin profits, take a moment to learn a bit more about cryptocurrency. There’s a chance it won’t change your mind, but becoming a more informed investor is always the right move.
Pros of Investing in Cryptocurrency
- High Liquidity for Popular Coins: Newer cryptocurrency may not be easy to trade out for cash, but once a digital currency is established, it’s often traded just as easily as stocks.
- Zero Downtime: Save for a technological breakdown with your “wallet,” you can access and use your cryptocurrency whenever you want.
- Potential Gains: There’s no denying the potential profits of crypto coins. The hard part is getting in and getting out at the right time.
Cons of Investing in Cryptocurrency
- High Potential Losses: A $2,000 investment in Lomocoin in 2018 was worth only $2.94 in 2020. If you bought one Bitcoin for nearly $19,000 in December 2017, it was worth less than $3,400 in December 2018. You can lose a lot.
- Extreme Volatility: Why can you lose a lot? Volatility. Did you see Elon Musk tweet negatively about Bitcoin? The cryptocurrency’s value dropped $10,000 almost immediately. It’s rare for any investment to have this level of volatility.
- Dead Coins: Getting in at the early stages of a cryptocurrency is the best way to make money. Unfortunately, most don’t succeed. By April 2021, there were nearly 2,000 “dead coins.” This is a lot of lost investment.
- Horrible for the Environment: A recent study found that “mining” Bitcoin uses three times as much energy as actual gold mining.
- No Hedge Protection: In most cases, a drop in the stock market also causes a decrease in cryptocurrency values. This means it’s really not hedging against anything.
Should I Buy Gold or Cryptocurrency?
No one can be certain that a particular investment strategy will pay off over others. The best move on your end will rely on your specific goals. If you’re looking for a hedge against an economic downturn with a proven history extending back thousands of years, the choice is obvious.
If you’re thinking of investing in gold and cryptocurrency, you’ve already learned a little about diversification. But with popular coins trading at insane levels – and sometimes fluctuating by tens of thousands of dollars – investing a small amount into a new crypto coin might be a better option.
Buying Gold with Cryptocurrency
It’s easy to make a case for both sides when it comes to investing in gold or cryptocurrency. If you’re looking for proven historical success, though, there’s really no competition. Gold has held value for civilizations stretching back thousands of years. Crypto is the new kid on the block.
Not that people can’t make money off digital currency – we’ve all seen it happen – but the volatility alone is enough to scare off most investors. And if you’ve accrued some level of cryptocurrency and are ready to cash out by purchasing gold, you’re in luck.
Choosing between gold and cryptocurrency is a personal decision, but if you’re ready to get out of crypto before a potential bubble bursts, few assets can achieve the value-storing power of gold.