Difference Between Bitcoin and Gold

Introduction

For the last few decades, the number of financial products have grown rapidly, creating a pool of opportunities and options for investors to park their money and grow income. Gold and Bitcoin are couple of them in the financial space. They both are entirely two distinct investment avenues in terms of attributes and returns.

In this case, it’s like comparing apples with oranges. Speaking practically, both gold and bitcoin can be deemed useless in some cases. For instance, you cannot take gold or bitcoin to any store and use it for making payments on purchases made. Whenever you see the market falling down from the sky, people move their funds from volatile markets to gold and bitcoin. This might wonder you, making you think what’s it with these two asset classes? Let’s comprehend each of them separately, and then walk into the differences.

Define Bitcoin

Bitcoin refers to as one form of cryptocurrency that uses decentralized route to conduct financial transactions between two parties. This asset class is considered as virtual money, though it’s deregulated and barely treated as an investment. The major advantage of bitcoin is that it does not need any third-party interference for transfers or transactions. One can trade bitcoin from any cryptocurrency exchange in the market.

How Bitcoin works?

Bitcoin is one such digital currency that functions without the supervision of any authority or the government. They don’t have any physical presence like gold and only stored digitally. Unlike banks or financial institutions, bitcoin transfers do not cost you a penny. Say, you have to transfer $1000 to a friend in New York. If you do this transaction via bank, you’ll be charged with processing fees. But if the same transaction is processed with bitcoin, you’ll not be charged with any fees.

The peer-to-peer network gives you individual control over your funds. All the information is stored in blockchain ledgers in the form of blocks. These bitcoins are secured safely in a cryptocurrency wallet, where you can easily access them whenever you want with a private key. If you are highly concerned about the security, prefer cold storage wallets instead of hot storage wallet.

How different is Gold from Bitcoin?

Gold and Bitcoin are two different investment options with unique features. The latter offer substantial returns over the former. While gold has the power to hedge against ups and downs in the market, bitcoin can be used as a hedge during market corrections.

For many who know bitcoin as a financial alternative to gain more money, but mostly treated as a payment channel. Some consider bitcoin trading as an investment, while others feel that it’s going to replace other currencies, including gold.

When it comes to yellow metal, gold, any purchases made is considered as an investment. This asset can be easily stored, leased, and exchanged with anyone. Both gold and bitcoin can be used as a collateral for loan purposes.

Factors affecting Gold and Bitcoin prices

Gold and bitcoin prices keep fluctuating every now and then due to various reasons. Below are some of the factors that cause these price changes.

• Demand and supply is one of the prime factors that impact the gold prices as well as bitcoin prices.

• Generally, the gold price gets affected due to external factors like inflation, policy changes, economic downfall, etc. This is not the case with bitcoin, and none of the aforementioned factors apply to this asset class.

• Although there are no regulations for bitcoin, the government decisions can have a slight impression on the price movements. Even gold prices get influenced due to changes in import and export policy. As some countries import gold, especially gold manufacturing nations, they tend to spike the gold rates, thereby, affecting the price of the gold.

• Bitcoin is the most popular and widely chosen cryptocurrency among the investors across markets. However, competition from altcoins like Ethereum, Polkadot, and others can influence the bitcoin price.

Difference between Gold and Bitcoin

S.No	Gold	Bitcoin
1	Gold is considered as safe-haven at the time of economic nosedive or market crash or dot com bubble	Bitcoin has inflation-beating attributes and hence treated as a hedging tool at the time of market crisis.
2	This yellow metal is used across multiple industries for myriad uses. Gold is used in dentistry, electronics, decoration, cosmetics, jewellery, etc.	Bitcoin is slowly entering into all the markets and spaces it possibly can. This digital currency is used in industries like online gaming, technology, digital spaces, hospitality, etc.
3	The liquidity of gold is highly liquid and can be leased, sold, and used as collateral for attaining loan.	Everyday numerous trades take place in bitcoin. Since there’s no time constraint unlike share market, investors can buy and sell anytime in the crypto market. The next liquid crypto after Bitcoin is Ethereum. At the end of the day, this asset depends of factors like volume, demand and supply, volatility, etc.
4	Though they’ll be ups and downs in the gold market, the volatility is not that extreme with this asset.	The volatility with Bitcoin is completely unpredictable. For instance, once this asset touched $69,000, and later, went down to around $46,000 mark.
5	One can own this yellow metal simply by buying in the market. They have physical presence, making the asset more trustworthy.	Bitcoin is completely digital and don’t have any physical presence. It’s totally virtual and can be only be traded and exchanged online only.
6	Gold can be a best financial avenue for portfolio diversification.	Bitcoin can also be a better alternative investment avenue for diversification. This asset class is ideal for someone who are willing to take extra risk.

Conclusion

Gold and Bitcoin are amazing investment avenues for wealth creation and diversification of your portfolio. The market for gold is highly regulated and secured, whereas bitcoin do not have any authority backed to oversee fraudulent activities in the crypto market.

The yellow metal is used in distinct industries and areas like electronics, jewellery, cosmetics and others. Bitcoin, on the other hand, is mostly used in social and technological platforms as everything operated digitally.

When it comes to liquidity, though gold can be easily traded, bought, and sold in the market, but bitcoin is highly liquid than any other assets. Some of the factors that impact the prices of gold and bitcoin includes demand and supply, economic fall down, exchange rates, volume, market volatility, etc.

FAQs

Q1)Gold vs Bitcoin: Which investment avenue is good for low-risk taking investors?

Ans)The market volatility is higher in bitcoin as opposed to gold. As far as returns go, bitcoin can give whopping returns, higher than gold, but investor has to take more risk if the market plummets. The price movements of gold are not extreme like bitcoin. So, if you are low-risk taking investor, opting to gold is the best option. Not only your investment would be safe, but you’ll also attain decent returns post maturity. In case of any market swings, investors will only lose a minimal amount at the time of exchange.