Gold or Bitcoin - Where to Invest today ? 2019

So What’s a better investment, gold or bitcoin? First of all ask yourself, do you understand the Bitcoin and Bitcoin mining concept properly? . Bitcoin is a complex concept, Its volatility very high. It is now in consolidation state and price is very high. Risk Reward ratio is not favorable. If you want to allocate some portion of your investment portfolio in Bitcoin then go ahead, otherwise it's not a wise idea of investment. While Gold is Limited, Divisible, Counterfeit-Resistant and Virtually Indestructible by Nature. Gold is an asset which can never go to zero. Bitcoin is a cryptocurrency which is not backed by any asset. The value of bitcoin can easily fluctuate south. Gold is a safe haven when it comes to uncertainties. It is still at the lows and has the potential to move up. Silver for that matter is an excellent investment. Bitcoin is a hype. I understand the importance of Blockchain technology and I would invest in the technology, not in the products. Bitcoin is a gamble and no doubt it is surging its way up and may go higher but at the end of the day, there is no logic behind this rally. USA has not regulated bitcoin as a mode of payment. Until Uncle Sam waves “Yes” to the cryptos, it is just like peeing in the wind. So what are the similarities between gold and bitcoin ? Like the bitcoin, gold must be obtained through mining. But, while gold is obtained through physical mining, bitcoins must be “mined” virtually through the deciphering of special computer encryptions. Another similarity is that both gold and bitcoins are only available in limited quantities. It is estimated that there is approximately 171,000 metric tons of gold in the world, while the Bitcoin system will only be able to generate and support a maximum of 21,000,000 bitcoins until further technological advances are made. Given such similarities and their individual market activity over the past few years, it is understandable why many believe that bitcoin could ultimately replace gold in terms of value. However, in spite of this evidence, there are a number of reasons why this shift is unlikely to occur. The first reason that the bitcoin will never replace gold is because it still poses a great deal of financial risk. Despite its recent peaks in market value, the bitcoin continues to experience significant price fluctuation that often results in substantial losses. Furthermore, both the future and the viability of the bitcoin have yet to be determined, leaving many customers wary over the the security of their virtual savings in the event that the system becomes terminated or obsolete. With such instability and uncertainty surrounding the bitcoin, it is unlikely that it will generate the customer base to match, much less surpass, gold as an investment asset. Another reason that the bitcoin is unlikely to replace gold as an investment asset is that the system has yet to achieve full status as a truly "universal" and legitimate form of currency. Many countries, including Germany, Norway, Russia, France, Thailand and Korea, refuse to use the bitcoin for fear of potential loss. In fact, several have gone as far as making it illegal in their country. In contrast, there isn't a country in the world that would ignore the value of gold, much less prohibit its use. Therefore, until the bitcoin can reach the same worldwide level of legitimacy and approval that gold has, it will never be able to replace gold as a valuable commodity. The final reason that the bitcoin is unlikely to surpass gold as an investment commodity is that gold has consistently demonstrated signs of recovery since it plummeted by 28% in 2013. Many people presumed that the sudden drop in gold's market value was an indication that it had lost its status as a safe investment choice. However, a number of signs, such as the increase in debt-to-GDP ratio and the increase in the price of mining, suggest that gold will not only recover from its drop, but it will continue to thrive as a popular investment commodity. Consequently, as long as investors believe that gold can generate profits, they will continue to forgo any other potential replacements. Cryptocurrencies Are More Similar to a Fiat Money System Than You Think. The definition of “fiat money” is a currency that is legal tender but not backed by a physical commodity. Since the United States abandoned the gold standard in the 1970s, this has been the case with all major currencies, including the US dollar. Ever since then, US money supply has kept increasing, and so has the national debt. In contrast, the dollar’s purchasing power has been on the decline. The huge spike in gold prices started right around the time when the Bretton Woods agreement collapsed in 1971 and US paper dollars couldn’t be converted to gold anymore. A clear sign of the decline in the dollar’s purchasing power since the move into a pure fiat money system. It’s clear that cryptocurrencies partially fit the definition of fiat money. They may not be legal tender yet, but they’re also not backed by any sort of physical commodity. And while total supply is artificially constrained, that constraint is just… well, artificial. You can’t compare that to the physical constraint on gold’s supply. Some countries are also exploring the idea of introducing government-backed cryptocurrencies, which would take them one step closer toward fiat-currency status. So ask yourself, how can you effectively hedge against a fiat money system with another type of fiat money? An asset is only valuable if other people are willing to trade it in return for goods, services, or other assets. Gold is one of the most liquid assets in existence. You can convert it into cash on the spot, and its value is not bound by national borders. Gold is gold—anywhere you travel in the world, you can exchange gold for whatever the local currency is. The same cannot be said about cryptocurrencies. While they’re being accepted in more and more places, broad, mainstream acceptance is still a long way off. What makes gold so liquid is the immense size of its market. The larger the market for an asset, the more liquid it is. According to the World Gold Council, the total value of all gold ever mined is about $7.8 trillion. By comparison, the total size of the cryptocurrency market stands at about $161 billion as of this writing ,and that market cap is split among 1,170 different cryptocurrencies. That’s a long shot from becoming as liquid and widely accepted as gold. The Majority of Cryptocurrencies Will Be Wiped Out. Many Wall Street veterans compare the current rise of cryptocurrencies to the Internet in the early 1990s. Most stocks that had risen in the first wave of the Internet craze were wiped out after the burst of the dot-com bubble in 2000. The crash, in turn, gave rise to more sustainable Internet companies like Google and Amazon, which thrive to this day. The same will probably happen with cryptocurrencies. Most of them will get wiped out in the first serious correction. Only a few will become the standard, and nobody knows which ones at this point. And if major countries like the US jump in and create their own digital currency, they will likely make competing “private” currencies illegal. This is no different from how privately issued banknotes are illegal (although they were legal during the Free Banking Era of 1837–1863). So while it’s likely that cryptocurrencies will still be around years from now, the question is, which ones? There is no need for such guesswork when it comes to gold. Lack of Security Undermines Cryptocurrencies’ Effectiveness. Security is a major drawback facing the cryptocurrency community. It seems that every other month, there is some news of a major hack involving a Bitcoin exchange. In the past few months, the relatively new cryptocurrency Ether has been a target for hackers. The combined total amount stolen has almost reached $82 million. Bitcoin, of course, has been the largest target. Based on current prices, just one robbery that took place in 2011 resulted in the hackers taking hold of over $3.7 billion worth of bitcoin—a staggering figure. With security issues surrounding cryptocurrencies still not fully rectified, their capability as an effective hedge is compromised. When was the last time you heard of a gold depository being robbed? Not to mention the fact that most depositories have full insurance coverage. Hype and Speculation Continue to Drive Cryptocurrencies’ Value. Since the beginning of the year, the value of Bitcoin has more than quadrupled—a tremendous spike in value that has sent investors rushing to invest in cryptocurrencies. But could this be nothing more than a market bubble? One of the world’s most successful hedge fund managers, Ray Dalio of Bridgewater Associates, certainly seems to think so. In September 2017, he told CNBC, “It’s not an effective store hold of wealth because it has volatility to it, unlike gold. Bitcoin is a highly speculative market. Bitcoin is a bubble.” The spike in Bitcoin prices seems to only lend credence to this view. With such an extreme degree of volatility, cryptocurrencies’ value as a hedge is questionable. Most people buy them for the sole reason of selling them later at higher prices. This is pure speculation, not hedging . Cryptocurrencies Do Not Have Gold’s History as a Store of Value. Cryptocurrencies have been around for less than a decade, whereas gold has been used as a store of value for thousands of years. Because of this long history, we know for a fact that stocks and bonds have low or negative correlations with gold, particularly during periods of economic recession. This makes gold a powerful hedge. What little data we have on cryptocurrencies does not show the same. Consider this year alone: while the US stock market continues to run record highs, the same goes for Bitcoin. It’s true that gold has also gone up, but the correlation has been very low and, during times of recessions, tends to swing to the negative side, Since 2010, there have been 15 times where the S&P 500 has seen drops of 5% or more. Out of those 15 stock market downturns, Bitcoin has been down for 10 of them. How is that a good hedge? In Conclusion : With Gold , You will not gain much and will pay some commissions too, so you will likely be a net loss. Bitcoin is currently in a classical bubble. It’s not an “investment” instrument, unless you’re running a big and risk-balanced portfolio with an investment horizon of 20 years or more. If you’re an amateur investor and you mess with bitcoin, you should be aware that what you’re doing is not investing. It’s simple gambling. If you pull-out before the bubble bursts , you’ve won, if you are too greedy and catch the burst full-on, you’re busted. That’s all. It’s a fun game, true, it can make you rich fast, true, it is very likely you will never see that money you gambled with again, also true. Use Gold to store your wealth , and trade Bitcoin if you like and be careful with its sudden fluctuations , you could lose all your money overnight . And also use Bitcoin for a cross border transfer of wealth , this is the only use where I see bitcoin beating gold ,as Gold is very difficult to transfer across the borders . But the only thing you should not do, is to invest all of your life savings into Bitcoin or Gold . Diversification is the rule of thumb for smart investing .











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