Gold or Bitcoin?

Gold or Bitcoin?

27 June 2019 from Anna Svahn

Gold has recovered from levels below 1200 USD per oz since August last year and recently broke the 1350 USD level. At the same time, Bitcoin has woken up from sleep and has since December gone from just under 3,200 USD to today's levels above 12,000 USD. Bitcoin, or "the digital gold" as it is sometimes called, is discussed in several places as the future version of the precious metal that served as money for thousands of years - but can really an asset replace another and one must as an investor really choose?

Pros and cons with gold and Bitcoin

In recent years, the discussion as to whether investors should choose gold or Bitcoin as a hedge in the portfolio has increased significantly. Some argue that Bitcoin and other cryptographic currencies completely lack the type of security that gold offers while others, crypto advocates believe that gold belongs to the past and that it is Bitcoin that should be considered the future gold. Now, Grayscale Investments has recently launched the #DropGold campaign for the launch of their new product offering exposure to Bitcoin. But the question is whether it really is that simple, do we really have to choose between Bitcoin and gold?
Although Bitcoin has been called "digital gold" for a long period, there are few similarities. What is usually lifted is the limited supply. There will never be more than 21 million Bitcoin, although those who rather stand on the gold side think that this is true with modification given the ramifications made and become Bitcoin Gold or Bitcoin Cash as an example. You can always create a new crypt, you mean, but you can't create more gold.
On the other hand, it is easier to carry digital currency than to carry with you physical gold, and the same applies to the problem of storage. Storing gold is more complicated than storing crypto currency.

Diversification is the key

Whether you are on the gold or Bitcoin side, one should keep in mind that risk diversification and diversification are key to achieving a better risk-adjusted return. This means that a portfolio that consists of different asset classes with low correlation tends to perform better in the long term than a portfolio with little or no risk spread. As a result, as investors, we should not at all choose between the physical or digital gold, but instead have a little of both. Part of the portfolio anchored in history and some with a view to the future, in other words.


Problematic to own real crypto currencies

With both gold and Bitcoin, however, there is a problem. Trading and storage. It is difficult to store physical gold if you do not have access to a vault in Switzerland or can imagine digging a safe behind the house. Similarly, it is difficult and above all not as profitable because of unfavorable tax rules for the one who is an active crypto investor to do so with real Bitcoins or other crypto currencies than if you shop through certificates on an ISK or KF. It is primarily about not having to deduct more than 70 percent of the losses you make on crypto trading.
For those who are therefore interested in learning about the future potential currency's development, one can therefore advantageously use certificates that follow Bitcoins, Ethereum's or Ripple's development without having to worry about problems during the declaration.
@Anna Svahn




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This information is in the sole responsibility of the guest author and does not necessarily represent the opinion of Bank Vontobel Europe AG or any other company of the Vontobel Group. The further development of the index or a company as well as its share price depends on a large number of company-, group- and sector-specific as well as economic factors. When forming his investment decision, each investor must take into account the risk of price losses. Please note that investing in these products will not generate ongoing income.

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03/02/2023 11:22:25


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