Gold had a bad year for investors in 2021. It was its worst year in the past 6 years for investors who sought refuge in the yellow metal to use it as a hedge against inflation. Many industry experts are claiming that Bitcoin (BTC) has replaced precious metal as an alternative to hedge inflation. And this trend has especially grown among millennial investors. Bitcoin is increasingly impacting the way investors spend and manage their wealth. Check what every investor should know about Bitcoin.
So, why are young investors shifting to Bitcoin? What does the sudden rise of cryptocurrency mean for gold? Find out here in this guide.
The Digital Coin Trend Among Millennials
Digital coins have become increasingly popular with the millennials and for good reason.
The current generation prefers conducting its transactions online and doesn’t want to carry cash. They find greater meaning and comfort in carrying out mobile or online transactions. Gold is a tangible asset, not crypto. However, the tangibility factor doesn’t seem to be of great significance to the new generation. Besides, these investors haven’t seen gold soar like their older-generation counterparts.
Gold has been the traditional asset class offering a hedge against inflation. However, it failed to meet expectations when it recorded a drop of 5% in value in 2021. It was the precious metal’s worst year since 2015.
Bitcoin, despite immense price fluctuations in 2021, gained 70% in value at the end of the year.
Similarities Between Gold & Bitcoins
Both gold and Bitcoin offer many advantages over fiat currencies. They cannot be debased or diluted and are considered effective ways to diversify investment portfolios.
There are some similarities between the two assets. This includes:
Rarity
Bitcoin and gold are similar in their scarcity, which is unlike fiat currency. A traditional currency can be printed to increase its supply without any apparent limitation. While new Bitcoin is currently being mined, there is a final cap on how many can be produced. The original creator set a limit of 21 million Bitcoin that could eventually be circulation and no more.
Significant Utility & Value
Both Bitcoin and gold have their respective applications and baseline values. Gold is used for a wide range of purposes. It is used in making luxury items such as jewelry items and in areas such as electronics and dentistry. Bitcoin also has value behind creating a new blockchain technology. It allows users to send value anywhere using the digital medium for a very small fee.
Transparency
Bitcoin is hard or impossible to corrupt. It has many features that make it almost a foolproof system:
- It is encrypted
- It has complex algorithms
- It is based on a decentralized system
Gold is also difficult to corrupt or pass off as fake. It has a well-established system in place for weighing, tracking, and trading. Both BTC and gold are highly liquid and can be readily exchanged for money.
However, the cryptocurrency’s potential as a means of banking has yet to go a long way for those that don’t have access to traditional banks. While gold’s slowdown may not be long-lasting and crypto has shown dramatic growth only recently over the past two years. This means that there is no way to tell which one is a better investment asset.
What is Working for Bitcoin?
Bitcoin may not have yet evolved into becoming a safe-haven asset. It is considered to have the potential once it reaches a level where it retains its value even during turbulent economic times.
A recent study recorded the following findings:
- 8 in 10 investors think that digital assets such as cryptos, Bitcoin ETF, and tokens should be included in their portfolio
- 90% of the respondents claim to find interest in digital assets
- The perception of digital assets is much more positive than 2 years ago
So Where Should You Invest?
Do the developments and findings mentioned above mean that Bitcoin is emerging as the new shining gold? Gold has long maintained its intrinsic value. However, the ROI offered by Bitcoin cannot be ignored by an investor. While crypto is a highly volatile investment class, a new era seems to be dawning.
Considering all these points, it is best to follow a balanced approach to investing on any trading platform. The general consensus is that Bitcoin and many other digital coins will continue to appreciate over time in spite of the high level of volatility.
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