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Gold vs. Bitcoin for Investors

Cryptocurrency basics

This article is for informational purposes only and should not be considered financial advice.

Modern investors have literally thousands of investment options at their fingertips. From classics like stocks and real estate to newer asset classes like cryptocurrency, it can certainly feel overwhelming!

Beyond the standard asset classes, investors have a variety of options when it comes to alternative assets. Two common options are gold and Bitcoin (as well as other cryptocurrencies). But comparing gold vs. Bitcoin is tricky — which is the “better” asset class?

The purpose of alternative assets

First, it’s helpful to understand why someone would consider investing in alternative assets to begin with. Why not just stick to stocks?

Well, one of the principals of successful investing is to diversify your portfolio. This means investing in a wide variety of companies and asset classes, to essentially spread out your bets.

Diversifying can help reduce risks, while smoothing out the bumps in a rocky market.

Having cryptocurrency and/or precious metals in your portfolio can help diversify your investments. Plus, these kinds of assets are separate from the standard financial system, making them attractive diversifiers and safe-haven assets.

The argument for gold

Gold is one of the world’s oldest asset classes. Long before there were stocks (or even currencies), gold was used as a store of value and a means of exchange.

Because of this, gold has a track record of increasing value, keeping up with inflation, and preserving buying power for literally thousands of years.

Gold is commonly used by investors to:

For much more information, read through our complete guide to investing in precious metals.

The argument for Bitcoin

Bitcoin is a much newer asset class, that was created in 2009. It certainly does not have the track record that gold has, and it’s difficult to say where its price will head in the future.

With that said, it’s easy to see that Bitcoin has been an excellent investment over the last decade. In fact, crypto in general has been one of the best performing asset classes of the modern era.

Will that trend continue? Nobody knows for sure, but it hasn’t looked pretty recently. In 2022 alone, Bitcoin’s price has fallen from around $47,000 to around $17,000 – a decline of over 63%.

Regardless, Bitcoin adoption has spread, and there is still potential for it to be a solid investment in future years.

Gold vs. Bitcoin

Comparing Bitcoin vs. Gold is difficult simply because the assets are so different. Gold is a physical asset with thousands of years of history, while Bitcoin is a digital asset with only around 13 years of history. Gold is viewed as a safe-haven asset, while Bitcoin is primarily viewed as a speculative asset.

What do the experts think? As usual, it depends who you ask — but Goldman Sachs, one of the largest investment banks in the world, has its eyes on gold.

In a recent memo to clients, Goldman Sachs noted that gold should be a better portfolio diversifier than Bitcoin. The bank listed several reasons for this, including:

  • Gold is less likely to be affected by tightening financial conditions (rising interest rates)
  • Gold is used as a hedge against inflation, while Bitcoin is primarily speculative
  • Bitcoin’s price has been affected by industry news like the collapse of the FTX exchange
  • Gold’s price is slightly up in 2022, compared to Bitcoin’s 60%+ decline
  • Gold has drivers outside of speculative purchasing: Industrial demand, central bank purchasing, and safe-haven demand, for example
  • Gold may benefit from increased market volatility and the corresponding demand for diversification outside of equities

In the end, nobody knows for sure what the “best” investment option will be, but it’s certainly useful to look at what the professionals are saying.

If you’re looking to diversify into physical precious metals, Bellevue Rare Coins is your source for investment-grade bullion.

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