The original cryptocurrency, Bitcoin, has become a very attractive investment option in recent years due to its increasing value and reputation as a reliable digital asset. However, throughout the past year, there has been tremendous volatility in both the price of Bitcoin and the larger cryptocurrency market, with unpredictable periods of price falls and increases.
Additionally, this week saw yet another major correction in the value of the cryptocurrency asset as the price of Bitcoin fell to $40,000, the lowest level since December 18, 2023, a decrease of about 12%. Shortly after the U.S. Securities and Exchange Commission (SEC) authorized Bitcoin exchange-traded funds (ETFs) to trade on January 10, there was a decline in price.
Although it was first anticipated that the SEC’s approval of Bitcoin ETFs would increase the cryptocurrency’s value, it actually caused a correction that rocked the market. Additionally, investors are feeling uneasy as a result of the sharp decline in the price of bitcoin. Conversely, other investors might be reassessing their plans and taking into account alternative assets, such as gold, which might offer a more secure shelter. But is gold a better option than bitcoin in reality? Let’s investigate.
Bitcoin is declining. Is it time to invest in gold?
Given the decline in the price of Bitcoin, it may be wiser to think about investing in gold instead. There are several compelling arguments for this, including:
The historical stability of gold
Gold is regarded as a safe-haven asset, which means that it can help shield your wealth from fluctuations in the market or the economy. In contrast to Bitcoin, which is a relatively recent addition to the financial scene, gold has traditionally withstood several economic downturns.
This is a major factor in why gold has historically been the go-to asset for investors in difficult times. They see it as a kind of investment that holds its value despite changes in the market. Furthermore, given how Bitcoin’s price is currently fluctuating, now would be a good moment to add gold to your portfolio in order to help offset some of the potential losses from your cryptocurrency purchases.
The opposite correlation with stocks
Gold has historically shown an inverse association with conventional stocks, frequently serving as a buffer against changes in the stock market. Historically, investors have demanded more gold when stock markets have been volatile or declining.
Investors looking for portfolio diversification may find this inverse correlation to be appealing, particularly when the overall market is having difficulties. Additionally, it can be a good moment to benefit from gold’s tendency to move inversely to Bitcoin and many other investment assets if you have a sizable holding of Bitcoin in your portfolio.
The power of gold to avert inflation
Even if the rate of inflation has decreased from this time last year, the most recent inflation report indicated that we might not be finished yet. It’s uncertain what may happen in the future, as inflation unexpectedly increased again in December and is currently above the Federal Reserve’s target rate of 2%.
Even while it’s unclear when the inflation problems will be resolved, one thing is certain: gold has always shown to be a reliable hedge against inflation-related price increases. Due to its historical ability to retain purchasing power in the face of severe inflation, precious metals are appealing to investors who are worried about the devaluing impacts of inflation on their portfolios.
The attractiveness of tangible assets
In contrast to Bitcoin, which is only a digital asset, gold is a real asset with inherent worth. Physical gold gives investors a tangible asset they can hold, whether it takes the shape of jewelry or gold bullion, such as gold coins and bars. A sense of stability and ownership that digital assets, like cryptocurrency, might not provide can be provided by this material attraction.
The uncertainty in the world economy
The global economic concerns and persistent geopolitical tensions may possibly be factors in the rising demand for gold. Investors frequently gravitate toward assets they believe to be safer during difficult or uncertain times, and gold is frequently one of the main beneficiaries of this mindset. Therefore, considering the geopolitical environment of today, investing in gold may be wise, especially as the price of Bitcoin continues to decline.
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