In recent times, investment has become one of the most useful sources of passive income. There are a lot of assets that people have invested their money into. Also, different people have different strategies to invest their money. Entrepreneurs and businessmen always keep their investment portfolios diversified in various assets. As per investment psychology, it is important to invest your money into different assets. Thus, it becomes a long-lasting and fruitful income source. Among all the investment assets, gold and precious metals have always been people’s major priority. In this article, we provide you with a complete analysis of how or Will Crypto Replace Gold As An Asset?
Time and research have also proved that gold is one of the best assets for investment in market crashes.
- As per one research, it is considered that gold has a phenomenal value in the market.
- Even when the 2007 – 2009 financial crisis happened gold’s performance was exceptional.
- In the market gold’s performance was 19% while the American equity market dropped down by 35%. Hence, gold has always been people’s first priority to invest their money in.
So, in recession and market crashes, gold performs well and gives a beneficial return. However, a sudden and quick rise in Cryptocurrency has kept people engaged with it. People are getting interested in Cryptocurrency investment.
As time passed, people have been wondering if Cryptocurrency is going to replace gold as an asset in the coming future. Also, a lot of rumours have been viral regarding the same. We have done a lot of research. We have analyzed both Crypto and Gold. Now we are giving our opinion on Cryptocurrency vs. Gold. So, as per my analysis, I indefinitely can say that at least anytime soon Cryptocurrency is not going to replace gold at all.
Not all investors have turned their investment into Cryptocurrency. There are some investors who are investing their money into Cryptocurrencies. However, some of the institutional investors have not turned their investment from gold to Cryptocurrencies.
Are Gold and Cryptocurrencies really competitors?
In present times, investors and institutes have been more interested in investing their money in Bitcoin and other Cryptocurrencies. Investors are investing their money in Cryptocurrencies in an unmatched number. All the institutional investors are moving to digital assets. Investment funds in Cryptocurrency assets have increased. Investment in Crypto funds increased from $2.9 million to $6.8 million between Q3 and Q4 2020. The price of Bitcoin only increased by 47% in December.
- JPMorgan Chase has said that Gold and Bitcoin’s competition has already begun.
- But there is some evidence that proves that the more success we get as a Bitcoin, the more gold we get.
Youngsters into Crypto
- In recent times, younger investors have started investors in digital assets than other metals.
- The official demographic trends have also confirmed that the tide is turning.
- For example, approximately 26% of youngsters aged between 25 and 34 have invested in Cryptocurrency whereas only 8% of youngsters aged between 25 and 34 have invested their money in gold and other metals.
- Warren Buffet’s investment group took a $565 million long position in Barrick Gold in the second half of 2020.
- Ray Dalio’s Bridgewater & Associates purchased a $400 million investment in the company in the previous quarter.
A Dual Hedge
It is not completely true that Cryptocurrency and Gold both give the same return on investment. They both have different values. Still, they both have their own values. They give a safe return on investment against the inflation risk. Both have different uses and give various returns. As we all know that gold is a very useful metal. It is very useful in the manufacturing of jewellery and expensive electronic items. On the other hand, Cryptocurrency is something that people use to make instant international payments without any restrictions from central authorities.
When we look carefully at both assets, it is clear that both assets are functionally different. One such evidence is the microeconomic lens. However, neither is strongly linked to the value of US dollars. Both are key hedging instruments for corporate treasury assets.
When it comes to the retail side, the majority of young investors are supporting Cryptocurrency over gold. But there are many benefits of gold over Cryptocurrency. Gold is the best metal as a store of value. It is also one of the best mediums of exchange. The above-mentioned benefits of Gold made it hard for people to believe that gold is going to lose its value at all for individual investors. Which includes:
- Long-lasting stability of its price
- Has a secure storage
- Useful in the real world industry
- Proven longevity
Cryptocurrency versus Gold
- Overall, both Gold and Cryptocurrency are best when it comes to investing.
- There is no such evidence that could prove that any Gold and Cryptocurrency are competitors. It is sure that neither of both assets is going away from the market.
- Both Bitcoin and Gold have functional significance but are different in values. That makes both complementary investments, not competitors.
It is true that institutional investors will prefer BTC more to invest their money in. This does not mean that it will be an existential threat to Gold. It seems like we are going to see Gold and BTC both tandem hedges that will correlate with each other. Thus, we are going to have two strong inflation hedges rather than only one.
Any of you are thinking of being an entrepreneur, it is suggested that you should keep your portfolio diversified in different assets. It would be a useless thing if you start depending on savings. Especially, one should invest money in assets that are not correlated with USD. Two of the best are Cryptocurrency and Gold. This should be the investment strategy for institutional investors, millennials, and other investors in 2021 and 2022.
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