Hi Platinum Crypto Followers,
Some of you may have been looking at the industry of digital currency and especially Bitcoin for some time. There is a recent tonality in the market arguing if Bitcoin is the new Haven for investors and traders.
Investors often keep a sizeable portion of the portfolios in an asset which is terms a Haven, just like your house provides you with shelter from all the dangers (to a certain extent), investing in a Haven provides the similar levels comfort in the investing space.
A Safe Haven is a precautionary trade which investors trade under heightened uncertainty.
The ultimate Safe Haven trade for investors has been Gold for over 10 years, however, a new popular derivative which is behaving like a Safe Haven is Bitcoin. Bitcoin stands tall in that basket because as of today the collective market cap of all the cryptocurrencies has reached a $266 Billion. The acceptance of Bitcoin has been phenomenal especially this year (it has been highly volatile as well).
Introduction to Bitcoin
The introduction of cryptocurrencies brought a paradigm shift in the financial markets. However, there is a new ‘gold coin’ called Bitcoin that is posing a threat to Gold’s status and the world gold council.
Tech-savvy Investors are now torn between securing their investments in the form of virtual currency or traditional currency.
Gold has been in the stock market for centuries. It has been adopted by many governments and institution globally. This commodity is very popular among investors in times of economic uncertainty since its prices are more rigid compares to currency-backed assets. Other commodities that are commonly invested in are oil and precious metals.
Why Bitcoin Could Offer an Alternative to Gold
Bitcoin, on the other hand, has not been around for a very long time: It has only been around for a decade. Over these ten years, Bitcoin has gained popularity among investors due to its prices as it is with every cryptocurrency. Unlike Gold, Bitcoin is being used as a store of wealth and a currency. It has however faced a lot of bashing from governments due to its decentralized nature. This led the USA government to issue a ruling that categorized all cryptocurrencies as commodities rather than currency. These commodities have, however, been adopted by institutions and enterprises using digital technologies. A good example is Facebook’s digital money, known as Libra.
In comparing these two entities with regards to factors that influence investment, one can be able to know the most secure place to invest in.
Gold and Bitcoin’s Supply
The supply of a commodity will determine whether individuals may invest in them. The maximum number of Bitcoin’s that can be supplied is 21 million as set by the regulatory Bitcoin network.
Currently, around 17.8 million bitcoins exist in the crypto market. The Bitcoin network regulates the rate at which these coins are released. They regulate the supply depending on how the mining is, and so one cannot be assured of a constant supply.
Natural commodities like Gold, on the other hand, follow the supply-demand law where the demand dictates how they are supplied. Besides that, their supply is also dictated by their availability, unlike cryptocurrencies. According to reports, there is an increase in the supply of Gold varying from 2,500 to 3000 tones.
Gold and Bitcoin’s Volatility
Volatility refers to the tendency of a substance to change unpredictably. It is considered risky to invest in volatile commodities. This is because you may end up incurring losses when their prices fluctuate.
Bitcoin and crypto currencies at large are considered as volatile since their prices keep changing by the day. In as much as this can be a downside for bitcoin investments, it can also be a blessing in disguise. If you buy Bitcoin when its prices are low, you can easily make a lot of profit by selling it when the prices are high.
Gold is not as volatile as Bitcoin. In 2017, it was recorded that Bitcoin was seven times volatile compared to Gold. Gold prices are currently ranging from $720 to $980 an ounce. The rigidity of Gold’s prices makes it a Safe Haven for investment.
The regulation backing a commodity will significantly influence the decision of an investor. Both Bitcoin and Gold have laws that govern their use and transactions. Gold and other precious metals have clearly defined laws since they have been around for a while.
Bitcoin, on the other hand, is still young in the stock market and so their regulations are still complex and undefined. Some countries like Russia, Vietnam, Columbia, and Ecuador have banned cryptocurrencies. The coins are either not legitimized as payment or not regulated. Reports also have it that the Chinese trade platforms also don’t allow cryptocurrency exchanges.
Gold and Bitcoin Transportation
Transfer of an asset from one place to another with convenience is a number one priority for any investor. Physical commodities are always transported from one place to another. Gold is a very heavy commodity and therefore may be expensive to transport. Also, one has to look for secure means of moving it due to its high value.
Bitcoin, on the other hand, is a virtual currency which does not require physical transportation. However, for one to transfer a coin from one wallet to another, some transaction fees may be incurred depending on the type of cryptocurrency exchange one is using. The Bitcoin Network can also control the amount of time needed for a bitcoin transaction to be accepted. The typical delay time is 10 – 20 minutes
Which is more reliable Gold or Bitcoin?
The price of Gold and Bitcoin are both showing solid gains, and this is nothing more than a risk off-trade. The question is, which one is more reliable?
Gold has a history entrenched in the global financial world as a safe haven asset. Bitcoin is relatively new finding its feet and its place in the global financial markets. However, this is not to say that Bitcoin cannot be considered as a Safe haven trade.
Similarly, Bitcoin Track record has been very similar to Gold throughout the recent trade tensions and that investors have used Bitcoin as another tool to hedge their risk.
Simply put, Traders and investors are considering Bitcoin as a Safe haven currency in line with Gold one which could not only compliment a holding of Gold but in the near future replacing Gold.
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Have a fantastic day!
Live from the Platinum Crypto Trading Floor.
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