As an investor, you don’t want to keep all your eggs in one basket. Diversification is key, and gold and cryptocurrency are some of the investments you could try. But which of these two should you go for? This article provides an in-depth comparison between gold bullion and cryptocurrency. Read on for details.
How To Invest In Gold
There are five major gold investment alternatives, namely:
- Gold Exchange-Traded Funds (EFTs)
- Trading futures in the stock markets
- Purchasing the physical gold
- Investing in Gold Individual Retirement Accounts
- Buying shares of gold mining companies
While all are feasible investment options, you may want to purchase physical gold bullion, so you get to physically handle gold. These take the form of coins, bars, or ingots and they’re usually priced per ounce. At the time of writing this article, the average price of gold was USD$1,900 per ounce.
If you’re interested and you have the cash, contact reliable and trustworthy firms such as Oxford Gold and others. Ensure you stay away from defrauders because they’re many in this gold industry.
Investing In Cryptocurrency
Cryptocurrency is a digital currency. Transactions are made possible by cryptography technology rather than authorization by a centralized authority. Thus, it’s sovereign and it’s neither affected nor influenced by outside factors such as government policies or inflation. Buyers and sellers can do business directly without using banks as middlemen.
Like gold, you can buy and hold cryptocurrency with the hope that their value will increase. You can cash them at a later date to make a profit. Also, you need an online wallet for you to invest in cryptocurrency. There are thousands of crypto exchanges, so do a diligent search for reputable ones to avoid being defrauded.
Alternatively, you can grow your crypto reserves by mining. This involves performing crypto-related tasks that earn you crypto tokens. You need to register with cloud-based crypto mining platforms or purchase crypto mining CPUs or GPUs.
Comparisons Between Gold Bullion And Cryptocurrency
For investment purposes, it’s always about returns and safety. The following comparisons give you an upper hand in knowing where to commit your finances:
- History
Gold investments date back to over 6,000 years ago. Back then, gold was used as a tool of exchange before money was introduced for trade. Given its high value, it’s also considered a measure of wealth.
The first conceptual cryptocurrency dates back to 1983 wherein cryptographer David Chaum developed eCash. Fast forward to 2009, Bitcoin, the first decentralized cryptocurrency, was introduced to the world. Thereafter, over 7,000 cryptos have been established and are in market circulation.
You can see that gold is a time-tested investment option, as opposed to cryptocurrency, which was introduced less than 20 years ago. Many people, including the government, don’t understand how cryptocurrency works. As such, they’re afraid of pumping cash into crypto wallets.
- Stability
In the course of history, fiat currencies have risen and fallen in value, and sometimes disappeared from the markets. But gold has always been on a bullish trend. Of course, the upward trend is characterized by several pullbacks, but the overall long-term picture is bullish. Gold isn’t affected by global unrest, economic dips, and political instability. When such ugly events grip the world, people turn to gold as a store of value.
This can’t be said of cryptocurrencies. They’re just a recent addition to the financial markets as a currency for trade. Though they’ve been on an upward trend since their inception, some of the most popular digital currencies have suffered catastrophic drops. Many investors panic in such events and cash their crypto reserves to avert further losses. Those with a short-term mindset and small accounts get entirely wiped out.
There are believable predictions that cryptocurrency values will soar exponentially in the future, but you can only wait and see. And that’s why it’s advisable to split your wealth into different investment channels. A little here and a little there. Don’t invest 100% in cryptos or 100% in gold.
- Long-Term Holding
As elaborated above, both gold and cryptos have promising future outlooks. Financial experts define long-term holding as anything above one year. And that’s the advisable approach for investing in gold and cryptos.
This way, you won’t be worried about the typical daily ups and downs. If you’re patient enough, you can reap big profits. But if you look at the daily fluctuations, you might easily get discouraged and call it quits, only for the prices to continue soaring higher and higher.
That’s why you need professional guidance to help you buy gold and cryptos at the right time and sell them when the opportunity strikes.
- Taxes
Both gold and cryptocurrencies attract taxes. The Internal Revenue Service (IRS) treats both of them as capital assets. For gold, the capital gain taxes are usually equal to your marginal tax rate, but with a cap at 28%. This only applies if you sell your gold bullion at a profit after holding them for more than a year.
For crypto, you can buy and hold them for the long term or use your balance to make online purchases. As such, crypto has several taxable events such as:
- Receiving cryptocurrency as payment for goods and services
- Buying and holding digital currencies for more than one year and cashing it at a profit. The current tax rate for such long-term holding is less than the gold’s tax rate. However, short-term gains of cryptos attract up to 37% in taxes.
- Receiving crypto tokens from crypto exchanges as a reward for bringing them more customers
- Cashing crypto into fiat currencies like the US dollar, Euro, or Japanese Yen
- Trading one cryptocurrency for another such as using bitcoins to purchase Ethereum
- Lending huge sums of crypto as loans to gain profits in the form of interest
- Popularity
The average daily trading volume of gold constantly stands at over USD$200 billion. With over 300 well-known crypto exchanges in the world, the daily trade volumes rocketed up to USD$292 billion in 2021. In some sense, cryptocurrencies have overtaken gold in terms of trading volume. But that may be due to their large variety (more than 7,000 cryptocurrencies).
Most governments still value gold. Countries such as Germany, China, France, and the United States are investing immensely in gold. The more moneyed individuals also have gold investments. You can agree that gold prices don’t favor low- and middle-income earners.
Crypto, on the other hand, favors all and sundry. With as little as USD$10, you can open a crypto wallet and buy the currencies. This has drawn huge masses to this investment option.
- Fraud
Gold investment frauds have lately been on the rise. The great demand for gold is the main factor that fuels such acts, and that’s especially true with online purchases as you can easily be swindled of your hard-earned money. For gold ETFs, fraudulent firms may take your cash but fail to purchase the actual gold bullions. For local store purchases, you can avoid falling for fake gold by considering factors such as quality, purity, prices, the weight of the gold bullion, and government certification of the dealers.
On the other hand, the availability of cryptos in different kinds increases the chances of fraud. Virtual availability reduces the chances of meeting with your seller, so most scammers hold this to their advantage. Once you transfer your cash into their account, they can disappear without crediting your wallet with cryptos. So consider working with the more reputable crypto exchanges. Don’t be lured into the trap of unconvincingly cheap platforms. Trust your instincts; if the deal looks too good to be true, it might be exactly that.
- Durability
Almost all gold that’s been mined is safely stored in bullion or jewelry form. Gold is a chemically inactive metal, so it’s highly resistant to weathering elements. That’s how people can pass golden jewelry from generation to generation, and storage companies are able to store gold bullion for millennia.
Cryptocurrencies are stored in digital wallets. With a two-way identification before transactions can be made, hackers find it difficult to steal cryptos. As long as you maintain control over your crypto wallet, your cryptocurrencies are there to stay. However, any malicious person who gains access to your login credentials can access your wallet and steal your cash.
- Conversion To Cash
Once you decide to convert your gold bullion into cash, there are several online sites, physical stores, and individual buyers you can turn to. However, the catch is on the gains.
As an investor, you rely on a buyer that pays you more money than your initial purchase price, so you’d make some profit. If the market price at the time of your sale is lower than your original purchase price, you’ll most likely get losses. The same is true with cryptos.
Final Verdict
You now have concrete facts on gold bullion vs cryptocurrency. As an investor, what works best for you remains solely a personal preference. First, question your risk tolerance before making any investment. Evaluate the pros and cons of each option and consult financial advisors if need be.
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