Cryptocurrencies Bitcoin and Ethereum have drawn many comparisons to gold during their meteoric but volatile rise to mainstream prominence. Bitcoin was built with scarcity in mind; there are a finite number of them, and it becomes harder and more energy-intensive to mine with time.
Many crypto enthusiasts described cryptocurrency as an inflation hedge and a store of value, like a digital version of investing in gold bullion.The accuracy of those claims remains undecided, especially in the wake of the most recent cryptocurrency market crash of May 2022 that saw hundreds of billions in market capitalization vanish in the space of a week.
Given the extent of the crash, investors may want to revisit the comparison to determine which asset best fits their preferences and plans.
Buying Gold vs Cryptocurrency
For those disinclined to adopt new technology, gold certainly has the edge over cryptocurrency. Buying crypto requires a type of digital wallet, as keeping it on an exchange comes with the risk of losing it in a cybersecurity incident.
When you want to buy gold coins or bars, you can go directly to a bullion dealer and buy them in person or online. Bullion dealers like Global Bullion Suppliers keep a steady inventory of investment-grade coins and bars available at a competitive price.
When it comes to supply, investment-grade coins are produced by national mints or private manufacturers. Ultimately, the gold supply is limited by what can be mined from the ground, but existing gold reserves likely far outweigh unmined gold.
Comparing Volatility
Investing can be tricky if you don’t have the stomach for volatility. Most investment vehicles come with the risk of volatility, which is a measure of how quickly prices change. Any investment has the potential to lose value, and there is no guarantee that prices will go up at any time, not to mention in any sustained fashion.
In Bitcoin’s relatively brief history, it has proven to be much more volatile than gold, which has been used as a store of value for thousands of years. By one measure in 2021, Bloomberg determined that Bitcoin is 4 to 5 times more volatile than gold.
That volatility means prices have gone up faster than gold, but it has also created the devastatingly rapid crashes Bitcoin has seen.
Gold is by no means invulnerable to volatility, but it is not nearly as much of a roller coaster as cryptocurrency. It tends to provide investors with a greater degree of stability, which can be attractive in an asset many buy as a hedge against market crashes.
Ownership and Control
Both gold and cryptocurrency come with certain security risks. With cryptocurrency, investors need to be concerned about cybersecurity and the risk of being hacked. With gold, investors have to worry about physical theft or damage.
Gold investors can rely on several methods for safely storing their gold. They may use a home safe, third-party storage, or storage at a bank. They can also take out an insurance policy on their gold.
Crypto owners have to rely on crypto wallets. Leaving cryptocurrency on an exchange can lead to loss by hacking or other complications, as recently seen in some high-profile cases.
Ultimately, it’s up to the individual investor to decide which asset is right for them, but the truth behind the comparison remains uptointerpretation for now.
