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Can Cryptocurrency Compete Against Precious Metal

Gold and silver coins

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Popular media has struggled to stay at the heels of the evolution of the investment market. But it’s hard to keep up when new forms of investment, like in cryptocurrency, are hitting record-high numbers.

With the gradual rise in investment in digital currencies, many variants of cryptocurrencies have emerged to steal the show in the financial markets.

With a market capitalization of Bitcoin pegged at 144.96 billion USD, there’s no denying that investors are leaning towards digital currencies.

That’s followed by Bitcoin cash which aggregates to market capitalization worth 4.11 billion USD.

Not to mention, the market capitalization of Ethereum falls at 19.14 billion USD.  

Average numbers of Bitcoin transactions are estimated at 328.38k with 5.6 million coinbase users found around the world. This is a fair picture of how the exchanges of cryptocurrency look currently.

With that said, you can hardly ignore that with low risk and high returns, gold still premiums in key markets. Daily trading volumes of gold average at 112.5 billion USD per day. With a liquidity data suggesting such high investor preference, you can’t question the reliability of gold investments.

On the other side, the future of silver investments settled at a 13-month high in July 2019.  Even though this outpaced the strength of gold, together they coalesce to present a sturdy front to the emerging cryptocurrency.

Even though in micro terms, silver poses a risk to the performance of gold. But from a macro perspective, these precious metals compete against digital alternatives with a united front.

Here’s more food for thought.

Defining Terms

The brilliance and appeal of gold is enough to introduce it in any market – financial or fashion. But for the purposes of this blog, gold can be said to be the metal that has been by our side since the dawn of time.

Be it clasping your wrist as a solid bracelet or resting in a vault as bars or coins, gold has sufficed sustenance needs for quite long. People have invested in gold through exchange-traded funds and even as a physical asset, over the years.

Beginning as treasures filling up coffers of reigning empires, gold has remained a trusted form of investment for modern investors. Compared to gold and other precious metals, cryptocurrencies are budding players in the financial market who have undoubtedly displayed remarkable success.

These digital currencies made their debut in the financial arena in 2009, in the form of Bitcoin. The nascent idea of a digital currency was founded on blockchain technology, which became the open source software where this currency was minted.

As obvious, this currency required vast amounts of computing and indefinite storage as well (which raised the stakes for the founders had the idea fallen flat). But to their benefit, it did better than predicted. There are also other types of cyptocurrencies including Ethereum, Litecoin, Zcash, Dash and more.

Shared Characteristics Between Gold and Cryptocurrencies

Even though both forms of investment differ vastly in physical terms, they do share some monetary characteristics.

Since both act like new forms of currency that have evolved or come into being apart from fiat currency, they serve the same functions that money does.

Their durability, portability, divisibility and cognizability are shared traits that are found in both, Bitcoins and gold. This is why, when we assess which is performing better as a financial asset, it’s fair because the competition is on equal footing.

Gold, on the other hand, has high intrinsic value which helps in stabilizing a price point. When it comes to investment, investors look for options that offer stability and sustainability more than high returns. In contrast to this precious metal, the market value of cryptocurrency varies drastically and uncontrollably.

This has brought into question their long-term intrinsic value, and what returns would they accrue in future when the prices are sweeping low.

Even though cryptocurrencies offer better liquidity as a medium of exchange which can function as money, it makes little sense to tie up your life savings in it. Sure, from a futuristic approach, Bitcoins can be used to make cyber payments for a cup of coffee, but is that enough for people to invest their fortune in it?

Other Distinctions

One primary distinguishing factor that separates gold from digital currency is that it can be obtained in physical forms such as jewelry, coins, and ingots.

This sheds light on an essential aspect of human nature, which leaves us skewed towards trusting things that have a more visible material presence. Holding gold coins in your fist gives you a greater sense of assurance than knowing that you own shares or worse, Bitcoins.

Cryptocurrency only exists virtually and their existence is founded on the algorithm that is used to create them.

Apart from the blockchain software that follows their movement, there’s nothing really real about these digital coins.

There are various safeguards and universally-recognized regulations that protect the sanctity of precious metal. This not only enhances its cognizability across international borders, but also makes them a more trusted option.

Compared to gold standards that are regulated and recognized worldwide, there are only a few established exchanges for digital currency that came into the scene a decade ago. Of course, this can be attributed to the long history of gold whereas the brief existence of Bitcoins puts them at a disadvantage.

Straight from the News

These speculations about whether the initial charm of cryptocurrency will last longer than the blink of an eye were validated a few years ago. The implosion of Mt Gox, a leading cyber currency exchange, for unknown reasons has brought the financial situation in perspective.

Not only did this event leave unanswered questions but also a gaping loss of $460 million in its wake. Investors were then led to think if their financial security will be tossed out the window at an impending risk of hacking.

When it comes to investing in precious metal, there are various ways of investing in gold, unlike the cryptocurrency which offers little variety. From gold bars, to bullions, coins, and IRA accounts, you can diversify your portfolio with a range of different gold investments.

How to Start

While these factors will have hopefully made the financial scene clear to you, they can only help make a decision, not materialize it.

For that you need a reliable and trusted investment company that caters to all your investment queries and addresses them dutifully. This is where we come in.

We’ve been a gold investment dealer that has helped investors find the right route for channeling their investments to a profitable future. We specialize in gold and silver coins, as well as IRA accounts.

Explore our services and call us at 1-800-559-0088 whenever you’re ready. We’re always available and ready to take on your questions and lay your apprehensions to rest!

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