Hi,
An Overview
The recession in the economy results in heavy loss of financial markets and investors. It is seen in the great recession of 2000 and the short phase of COVID-19. The reoccurrence of recession pushes the investors to take measures and avoid heavy losses. The experts and the unskilled economists are likely to be alert in such situations. During the days of the pandemic COVID-19, the economies were shutting down. Speculators and investors noticed no change in the value of Bitcoin. Investment is directed to the Bitcoin market. Institutional investors took special interest and looked for instruments and funds resulting in its price soared by April 2021. As a result, the price rose to $61,000. The buy-and-hold strategy was popular in that period and gave rise to the price of Bitcoin during the pandemic phase.
Gold
Historically, it is determined that Gold performs well during market corrections. It maintains its value, and price and can rise during a threatening recession. It is a useful hedge against market correction and recessions. However, not all investors invested in Bitcoin but the majority of them stuck with traditional strategies of transitioning to Gold. This increased the Gold price from $1300 to $2100 in 2020. The downward shift in the price of Gold was observed with the upward movement of economies but the price is higher than the pre-pandemic level.
Key Differences
Gold has been a good source of exchange and holding wealth in markets and economies for thousands of years. Bitcoin has been arrived in 2009 and got recognition after several years of its birth. Following are some of the differences between Gold and Bitcoin providing clues to making decisions about portfolio:
| Bitcoin | Gold | |
| Regulations | Depends on the principles of different countries | Facing some restrictions |
| Utility | A growing number of uses | Used in different industries and products |
| Liquidity | Depends on the market | Depends on the market and type of assets |
| Volatility | Initiated in 2021 at $32,222
Rose to a high of $ 69,000 The closing point at $46,211 |
Initiated at $ 1,943 an ounce
Dropped to a yearly low of $ 1,683 The closing point at $1,805 |
Decisions related to portfolio investment are dependent on regulations, utility, liquidity, and volatility of the products. Transportation of Gold across borders requires regulatory permissions. The investors are limited to purchasing Gold only from registered dealers and brokers. It is not easy to steal Bitcoin. It is because of its encrypted and decentralized system. Across the borders, it is used legally but the anonymous nature makes it challenging in many regulations. Gold is used in different applications, currency, luxury items, industry, electronics, and many more. On the other hand, Bitcoin has limited usability. It is used as a digital currency and speculative investment. It works like an emerging financial technology working on the concept of a crypto-currency-making platform for decentralized finance. However, investors consider it a heaven for liquidity. It is hard to liquidate the Bitcoin to coin-base exchange. It is because of fact, only a $50,000 liquidation of crypto-currency is allowed per day legally. If the Bitcoin price reaches higher than the daily limit of your exchange, you will only do it in small increments. When, the market swings and investors sell their Bitcoin, the price drops dramatically. Bitcoin is greatly affected by media campaigns, investors ‘sentiments, regulations, and hypotheses. It causes high fluctuations (upward-downward) in Bitcoin price. But Gold lacks this type of volatility that makes it a safe asset.
The rarity of Gold and Bitcoin
Gold and Bitcoin hold rare poistion as far as concerns the availability of Gold and Bitcoin in the market. In contrast to other cryptocurrencies, Bitcoin is a rarer one. Hence, Gold and Bitcoin are rare in their defined categories.
The similarity between Gold and Bitcoin
Bitcoin and Gold are similar in the sense that both are preferable investments. If investors adopt the right strategy two investments can be fruitful and profitable.
Better investment: Either a Bitcoin or Gold
- Bitcoin is more volatile than Gold and hard to liquidate in the market legitimately. Therefore, it is risky to invest in Bitcoin as compared to Gold. However, the investment decisions in the financial market depend on risk tolerance capacity, use of strategy, and amount of capital. Hence, a financial advisor can help creating investment goals and selecting the product for investment and strategies.
