Blog Post

June 21, 2022

Gold vs Cryptocurrency: Is investment in gold outdated

For years the gold market has been said to be in a state of a bubble. Yet, it is one of the oldest existing markets worldwide. Cryptocurrencies, on the contrary, are still a novelty, and they have proven to be quite a volatile market, albeit one that can provide solid short-term gains (at higher risk). 

So, should you invest in cryptocurrency because an investment in gold is outdated?

According to the IMF, crypto is no longer on the edge of the financial system. Millions of investors have invested in crypto. Some even go as far as claiming that crypto will supersede gold as a main investors’ choice.

A common comparison between gold and crypto is that both assets store value and many believe crypto serves as a hedge against inflation. As central banks around the world are printing more money to boost their economy during a crisis, they are consequently devaluating traditional currencies. According to de Vere’s research, millennials are more likely to invest in cryptocurrencies as a “safe haven asset” than gold in times of inflation.

The Brothers Winklevoss, a duo of well-known and successful crypto investors, see bitcoin not just as a technological disruption but as a fundamental change in the way transactions are conducted and value is stored. They deem it as being a better investment than gold. The main reason for that is because bitcoin can be easily transferred from one digital wallet to another, while it is hard to move gold.

But can gold really be replaced so easily in the investors’ minds and hearts? And should it be?

Gold has been around for millennia, and it’ll likely be there for the next. When financial crisis looms, investments in gold tend to rise steeply, supposedly as a hedging strategy.

Let’s take the increase in gold price following the start of the Ukrainian/Russian war, for instance. Projections show that the price of gold may even surpass its record price in 2020 of 2000 USD/oz.

According to the de Vere Group, Switzerland saw a peak in its shipments of gold to the US in the last two months.

On the other hand, crypto had its peak in 2021, but it has now dropped to half of that value.

As inflation grows, experts believe that gold has a significant advantage compared to cryptocurrencies. Many investors have more trust in gold than cryptocurrencies.  Cryptocurrencies are still finding their way and can be very volatile, and therefore a riskier investment.

Peter Shiff, CEO and chief global strategist of Euro Pacific Capital Inc. stated that bitcoin should be viewed as a sound investment when society feels optimistic and the economy is going well. Gold and precious metals present better investment opportunities during times of economic and societal hurdle.

In conclusion, should you invest in gold or in cryptocurrencies?  

Nigel Green, de Vere Group’s CEO, believes that portfolio diversification “remains the best way for an investor to seize opportunities and mitigate risks”, and we cannot but agree with his cautious approach. Crypto might serve its purpose in a balanced portfolio, but gold’s value and importance is here to stay.

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