While diversifying an investment portfolio is a good investment strategy, choosing between gold and cryptocurrency may be difficult. Some may prefer the traditional investment hedge, while others want a new venture. But many from this crop prefer two lucrative investment opportunities to expand their portfolio—gold and cryptocurrency.
The gold vs. crypto investment debate has been going on since the latter reached notoriety in the 2010s, but regardless which you choose, either requires careful analysis to ensure you’re putting your eggs in the right investment basket.
That said, in this article, you’ll learn some factors you need to understand first before investing in gold or crypto.
1. Legality
Although cryptocurrencies are a newer investment than gold, some countries have legalized and adopted crypto investment. However, there are still countries restricting the use of cryptos, while others have unclear crypto regulations.
Because some crypto holders have given these digital currencies a bad name, authorities have developed regulations to address such issues. An example is that some government authorities ensure that digital assets and crypto holders abide by security protocols.
Some cryptocurrency trading platforms and wallets need to verify that the person registering is a real person, requiring the person to show government IDs and other documents proving that they’re the one and the same person in the ID. That way, cryptocurrencies won’t be used by money launderers and other people with criminal intent.
Gold, on the other hand, is an established investment. Therefore, you’ll only need money to purchase gold. Since most gold sellers are registered in a state, you’re assured that they abide by local laws and regulations.
However, as a responsible investor, you’ll need to verify if these sellers are legitimate. One way to do this is to check their business with resources like www.oxfordgoldgroup.com to know how reputable they are. Here, you’ll find testimonies from previous clients and answers to FAQs. Some even post their business registration, ensuring legality in your transactions.
2. Rarity
Another way to weigh which one is better is to understand the rarity of both. As for gold, it’s becoming more valuable as years pass by because of its rarity. Throughout the universe, gold is rare, making it hard to produce. Even the supernovae’s chemical forges cannot create a steady supply of gold. This is one of the reasons why gold’s price is increasingly high.
On the other hand, cryptos are many in numbers and classifications. For instance, Bitcoin, which is the most popular cryptocurrency, has an 18 million current supply. Moreover, the supply of such digital currency is capped at 21 million that can last until 2140. While Bitcoin’s the most expensive and most popular crypto, there are others in the market. Some have higher supplies, making it possible to buy different types of cryptos. With such, some cryptos are more affordable compared to gold as they’re not that rare.
In comparison, gold is mined underground, making it impossible to give numbers to its supply. It may be rare, but no one can predict how much is underground. However, unlike gold, with crypto like Bitcoin, the cap is known.
3. Volatility
Apart from knowing how legitimate or rare one is over the other, you must also understand the volatility of the two. Volatility refers to how fast gold’s or crypto’s price can go up or down. For cryptocurrencies, many factors make them volatile. Some of which are the following:
- Future Crypto Value Is Uncertain: One of the main factors affecting crypto volatility is the perception of the value of cryptos. This means that people are uncertain if cryptos are helpful in the future. Whether cryptos can still buy goods or services, people can’t predict this.
- Store Of Value: Another is how people can transmit cryptos into other forms of assets. While cryptos have frictionless value transfer, their store of value is still unclear. This results in swings affected by what’s happening in the news cycles.
As for gold, it’s also an investment with high volatility. Unlike cryptos, however, gold doesn’t fluctuate because of news events. Sometimes, gold prices may even increase during economic crises. Moreover, some may observe straightforward volatility in the gold market. For instance, gold’s volatility is high if it has more movement during a specific period. In short, gold volatility is up if is Gold IRA safe?
Another factor of gold’s high volatility is when a high volume accompanies it. This happens when there’s a relevant juncture in the market. For instance, gold in high volumes means more volatility. This may mean that an important reversal may happen.
4. Liquidity
Liquidity is also a factor that may help you decide what to invest in. In investment parlance, ‘liquidity’ means the potential of an asset to become cash easily and quickly. But of course, it mustn’t affect the asset’s value.
While most investors prefer gold as an alternative to preserving their wealth, it’s also a liquid alternative. Gold has a proven and long track record of intrinsic value because of its rarity and usefulness.
Whenever you decide to own or dispose of your gold investment, you can easily find active sellers and buyers for gold. This includes private individuals, banks, dealers, and refineries. You may also find companies to invest in using or mining gold because many industries still use gold, making it an in-demand commodity and making gold a very liquid investment.
Besides, you can agree on an agreed price in the future in case you sell or buy gold. That means you may not have to follow the current spot prices of gold. This alternative allows sellers and buyers more opportunity for exchange.
For cryptos, its liquidity is also high. Since cryptos are digital assets, which means all transactions are done online. You cannot buy or sell crypto without using a digital platform. Much like buying or selling stocks, crypto investors can easily find buyers or sellers of such digital currencies.
However, the problem relies on the cryptocurrency you’re investing in. For instance, you may quickly sell your Bitcoin because it’s one of the most liquid cryptocurrencies. But you may find some less popular cryptos hard to sell higher prices; sometimes, you may end up selling them at a loss. Before delving in to crypto, you’ll have to do your homework and choose the cryptocurrency you intend to invest in so you won’t end up losing your hard-earned money.
Conclusion
Investing in either gold or crypto is a good option to diversify your investment portfolio. With the many ways to buy these assets, you can easily buy or sell them. While each has its advantage over the other, it’s best to consider the factors mentioned in this article and always do your research. That way, you can decide which risks you’re willing to take.