Gold Against Cryptocurrencies: Why You Don’t Have to Choose
Gold has been taking a back seat for some investors who have gravitated toward acquiring cryptocurrencies. Goldman Sachs has said it doesn’t believe investors should abandon gold as a store of value, citing it’s proven for thousands of years it’s the best at protecting assets. (Recently Goldman has taken a much more positive view of Bitcoin in particular, and cryptocurrencies in general.)
Proponents of cryptocurrencies on the other hand, note that the coins have acted in similar ways as gold in regard to scarcity, and Bitcoin and others have responded to geopolitical events in a similar way as gold has.
Having said that, it’s not really accurate to compare the two as if they’re of the same asset class, even though there are some similarities between them.
Goldman pointed out that cryptos are very volatile and are easy to hack; the latter statement isn’t true at all for the quality cryptocurrencies like Bitcoin, which has never been hacked. Some of the exchanges have been hacked, but not the quality cryptocurrencies.
On the volatile side of the issue, it’s really not that much different than gold in general, as Gold has moved up and down in response to inflation and decisions by the Federal Reserve for years. It will continue to do so.
Of course at this stage of development, cryptocurrencies make a much wider swing than gold does, but the underlying principles remain in place.
As for faith in gold versus cryptocurrencies, it comes down to imputation of value by users that matters, and I see that changing in the years ahead to a more positive outlook for Bitcoin, and probably gold. When considering the U.S. dollar, which the world continues to trust, it has lost about 97 percent of its purchasing power since 1913. Once Bitcoin stabilizes, increases its transaction speed, and includes the protection of custody, it’s liable to vastly outperform gold and be far more desirable than the U.S. dollar, especially when it is used at the point of sales (POS) by retailers.
When you come right down to it, the imputation of value to gold, cryptocurrencies, and the U.S. dollar, is something people do. And if they trust in it, they’ll embrace it for what their purpose is.
Digging deeper into the blockchain and bitcoin: Mastering Bitcoin: Programming the Open Blockchain
You can talk about store of value with gold, but you also have to look at the upside potential of the quality cryptocurrencies, which will create generational wealth for many people over the long term.
I’m not saying you should invest in cryptocurrencies in general at this time, because there are over a 1,000 of them, and most of them are worthless or scams. Bitcoin still has a strong long-term future, and Ethereum looks solid as well.
Essentially, what you want to do when analyzing cryptocurrencies is look at whether or not they provide an answer to a specific problem, and look into whether or not the underlying code is vulnerable to being hacked. Again, Bitcoin and Ethereum have passed those tests, as others have as well. Either check out cryptocurrency trade sites for the vulnerability of the underlying cryptocurrency code, or have a trusted friend that has the ability to determine the safety of the code in regard to it being able to be hacked.
Gold will be the best store of value and protection for generational wealth for some time, and quality cryptocurrencies will produce a lot of wealth for those that get into them.
Look at smaller gold coins: 2017 1/10 oz Gold American Eagle BU Gold Brilliant Uncirculated
Don’t go rushing off and buy some crypto because you think it’s passing by you. We’re in the early innings of the asset class, and it’s just getting going.
As for being hacked, I’m not aware of those that maintain personal control of their keys (encrypted password) ever having been hacked. Those that give up control to exchanges could lose everything, which is why you should only keep your key in a cold wallet, meaning something that isn’t connected to the Internet; such as writing it down on a piece of paper (preferably several) and storing it on a memory stick.
There are some publicly traded companies that are starting to attract interest, but I really don’t want to talk about them because you need to know the market some and understand the blockchain enough to make an informed investing decision.
I’m invested in some of them, and I’ll let you know about them if you’re interested. Let me know in the comments.
As for gold, it’s not going anywhere, and it will, for now, remain the best store of value the market has to offer.
The best way to tackle this in my view is to be invested in both sectors. You can protect your assets while having the potential for enormous gains.