Bitcoin is often spoken of as if it were digital gold, meaning by this metaphor the fact that the most important and capitalized cryptocurrency in the world can at least partially replace the functions of the precious metal as a haven within one’s wallet. But is it so? Is it conceivable that BTC could replace gold in the future? And, again, is it worth investing in Bitcoin or gold in today’s Nigeria.
Without anticipating the reflections we will arrive at in the course of the next few lines, we can however already premise that a lot will depend on your investment objectives, considering that Bitcoin and gold are not completely replacement assets, and therefore deserve to be addressed with particular specificity.
This is the theme that we will take care of in the next few lines, accompanying you in an attempt to understand which of the two forms of investment best aligns with your purposes.
Gold Price and Bitcoin Price, has it changed over time?
In this path, the first thing we must clarify is how the price of gold and the price of Bitcoin have evolved over the years, to verify what have been the developments and fluctuations encountered by the values of the two assets.
As for gold, its role as a reference point among raw materials is evident throughout history. The highest value of gold was reached in 2020, with a value of 2,067 dollars per ounce. It is quite easy to understand that this upward push in gold prices two years ago was determined by the climate of economic uncertainty behind the Covid-19 pandemic: the fear of a long and deep recession has therefore led many investors to invest their money in gold, so much so that in the first eight months of 2020 (i.e., from the outbreak of the pandemic to the middle part of the year), the prices of the precious metal rose by a third, and fell sometime later. At the same time, the price of Bitcoin has risen, which we will deal with shortly.
Bitcoin and Gold, two very different assets … or not?
On the other hand, broadening the time spectrum of analysis, we note how the price of gold, although it has fluctuated over large brackets, is not as volatile as that of other assets. That is, the change in the price of the precious metal does not occur as abruptly as it could happen with other commodities or with assets outside of commodities. It is also for this reason that investment in gold is usually considered safe, especially in periods of great uncertainty, in which other assets show the side of greater vulnerability.
Conversely, Bitcoin prices traditionally have been characterized by rapid rises and drastic falls. In short, even without going into excessive analytical details, a look at the historical chart of BTC makes us understand how much more risky this investment is than gold.
In its relatively latter history, BTC hit its peak in 2021, but it is unclear whether it will continue its rise or reverse the trend this new year although the latter has been the case for recent times. For many, analyzes on the future of Bitcoin prices is quite rosy, with strong growth prospects. For others, however, there is a real risk of a weakening.
Much will depend on how Bitcoin is used by the mass market, as well as its adoption by institutional investors. The supply and demand of the entire cryptocurrency ecosystem and this asset, in particular, will also constitute elements of influence on the price of Bitcoin, as well as the advent of more successful cryptocurrencies, international and national regulations, and much more.
Because Bitcoin is NOT like Gold
As we have already mentioned at the beginning of this article, talking about Bitcoin and Gold as if they were two similar assets is wrong.
Although there are some commonalities between the two assets, the differences are even more numerous, starting with the fact that gold is a physical asset, while Bitcoin is a digital asset. Furthermore, cryptocurrency – as we have already underlined in the last few lines, is extremely more volatile than gold, even if its volatility makes it preferable in the eyes of speculators most interested in obtaining high profits when prices are they move with the decision.
In addition to the different consistency and volatility, their different longevity also contributes to creating a clear dividing line between Bitcoin and gold: gold is considered an extraordinarily reliable asset thanks to a prestige acquired over the centuries. Bitcoin, on the other hand, was launched only a decade ago and, in its short life, it has not always enjoyed particular favors.
The commonalities between Bitcoin and Gold
As we highlighted a few lines ago, numerous elements prevent us from creating a similarity between Bitcoin and gold.
However, this does not prevent us from highlighting how the two assets have numerous points in common, starting with their function as a haven (in truth, well established for gold, and the process of affirmation for BTC).
In addition to this, it should be remembered that both gold and Bitcoin are two “finished” assets, offered and available in limited quantities. For example, it has been predicted that there may only be 21 million BTC in circulation, thus making cryptocurrency a limited and very valuable digital asset. As far as gold is concerned, production is decreasing and in a few decades, it could be so rare that mining costs could become unsustainable.
When investing in Gold is better than investing in Bitcoin
That said, we can try to understand when investing in gold is better than investing in Bitcoin and, in subsequent paragraphs, vice versa.
In general, and all other things being equal, investing in gold is better than investing in Bitcoin because gold:
- it is a stable investment par excellence, with its price movements slower than BTC in terms of growth and decline. Furthermore, gold can be very resilient in the face of the worst crises, thus constituting a solid and safe haven against any adversity;
can meet the needs of those looking for a good long-term investment.
- We have already mentioned how gold has long been used as a store of value in the long run, and that unlike Bitcoin it can hold its value over the long term. In short, it is a part of the portfolio intended for low-risk investments and to protect purchasing power over the years;
- It is a physical asset and, as such, it is preferred by all those investors who do not have much confidence in investing in digital assets, preferring instead the tangibility of their investment among the fundamental characteristics of their portfolio;
- It is a safe asset because it is not very risky and can be easily stored in special deposits. And if you want to forget about the risks in this sense, you can also invest in financial gold and, consequently, forget about the dangers that you would run in keeping an ingot at home.
When investing in Bitcoin is better than investing in Gold
In some hypotheses, investing in Bitcoin could instead be cheaper than investing in gold. Think, for example, of the fact that:
- Gold cannot be used as a currency to buy goods, and at the very least you could opt for a difficult barter. Bitcoin, on the other hand, can be used in an increasing number of outlets;
- Gold is riskier than Bitcoin if you choose to physically store it without complying with security standards. Think about thefts or natural disasters;
- You can invest in Bitcoin costs zero, or almost. You can therefore store the asset in your digital wallet without having to endure the typical economic conditions of gold;
- Bitcoin is a very easy asset to buy and sell, considering that you can manage all operations directly with a few clicks, using one of the many online trading platforms;
- Although gold is considered to be a safer investment, Bitcoin is the asset you must bet on if you are looking for an extraordinarily high return!
Where to invest in 2022: Gold or Bitcoin?
At this point, we have come to the conclusion of our focus with a crossroads still in mind: Is gold better or is Bitcoin better if we want to invest in 2022? Your naira needs to be accounted for;
Unfortunately for you and for your needs to have an unambiguous and concise answer, there is no immediate and valid response to this question for everyone.
On the other hand, every investor has his needs, has his preferences, has different objectives and different possibilities.
In a nutshell, however, we can remember that:
- gold is a more stable, less risky, and less volatile investment. Nothing can replace gold as a haven for the time being;
- that in Bitcoin is an investment in a very versatile and risky asset, but it can guarantee you huge profits in the short term (moreover, by investing in BTC with CFDs you can also open short positions and, therefore, get profits when BTC falls).
Having said that, we cannot fail to suggest that you make your choices calmly and carefully, trying to understand which is best to buy to enrich your portfolio with opportunities. The Nigerian economy is already harsh enough and making a bad investment would furthermore contribute to the ruin.
Moreover, also keep in mind that one investment certainly does not exclude the other and that you can therefore mix them adequately in a well-balanced portfolio.
Where to invest in Bitcoin and Gold with CFDs
As we have already anticipated in the last few lines, a good way to invest in Bitcoin and Gold is to use contracts for difference, or CFDs.
As you may already know, investing in gold or Bitcoin with CFDs means that you will never acquire the asset directly, but you will use it as the underlying of a futures contract that will allow you to earn if you can correctly predict price movements.
All you have to do to invest in gold and Bitcoin with CFDs is to choose one of the best brokers you can find on this site and open a free account in them.