With rising inflation and uncertainty in the economic field, investors are looking for safe havens for investments, gold has always been at the forefront, and some are also offering digital currencies.
For many years it has been the norm for investors to keep their savings, whether in real estate, stocks, bonds or gold.
For centuries, gold was considered a major hedge once morest inflation, but more people are starting to view cryptocurrencies as a store of value, and thus Bitcoin has earned the reputation as “digital gold”.
The well-known American investment education website, Investopedia, was published An article Explaining the difference between investing in bitcoin and gold.
The report initially indicated some important definitions:
What is a store of value?
A store of value is an asset that does not lose value over time.
There is no doubt that fiat money is a bad store of value. Cash can be used as a medium of daily exchange and short-term liquidity, but over time it will lose its value.
What is inflation?
Inflation is the primary tool that governments around the world use to control the money supply and price movements.
The authorities devalue their currencies a bit each year, prompting people to spend or invest more in the hope that this will stimulate economic growth through job creation.
Therefore, money loses value over time, that is why savings must be stored in an asset that will retain its value, and that is why people invest in buying gold or stocks, bonds, real estate and other assets that maintain their value or even increase their value over time for the sake of profit.
Investing in gold
When financial markets are under stress investors buy gold as a “safe haven” and even when the economy is booming they buy more jewellery.
One of the important points that support investment in gold is that its ownership is spread all over the world, and it is extracted in almost all countries.
He points out a report It was published by “The Motley Fool” website and compared investment between gold and cryptocurrencies, indicating that the performance of gold amid high inflation this year was not good, and despite its circulation as a rare commodity and a safe haven, its prices fell by regarding 20% last September from what It was at its peak last March.
He points out that one of the main factors for the performance of gold is the strength of the US dollar, which reached its highest point in two decades during the recent period, and with the economic slowdown in China and Europe, investors flocked to it, which means that investing in gold does not tend to perform well when the dollar is strong.
Investing in digital currencies
When compared with gold, we find that the demand for cryptocurrencies is limited to “speculation”, and investors view them as “a high-risk bet with high returns.”
The report indicates that digital currencies are subject to large fluctuations in prices, as their prices rise and fall depending on the “accumulation of speculators.”
Although digital currencies are available to everyone, entities in 5 countries control 80% of the mining capacity of the Bitcoin network, and 2% of the owners of this operation own 95% of all available bitcoins.
The report shows that gold moves in isolation from the stock markets, while digital currencies do not follow this pattern.
He asserts that Bitcoin and digital currencies still lack a longer period of time to know whether or not they can be an effective hedge once morest inflation.
It shows that it is relatively easy to buy and sell digital currencies and gold, but gold still has a greater “established” advantage in its trading.
