Comparing physical gold and cryptocurrencies appear as a challenging task. While one is physical, extracted from the ground and therefore palpable (gold investors would say “tangible”), the other is purely digital and exists only in bits and bytes. However, both the physical and what some call “digital” gold share the same property : they exist through mining.
Gold as a precious metal exists through mining and extraction from ore.
Cryptocurrency on the other side, exists also through a process called mining. Bitcoins are “mined” (created) by computers and special hardwares equipments who solve a complex mathematical problem. This process requires a lot of energy consumed by the CPU / GPU and therefore electricity.
It appears that both processes share some common characteristics. In fact as proof of the comparison, the analogy is even given in the Bitcoin white paper (technical paper that explains how the cryptocurrency works). Here is a screenshot of the relevant section :
Some popular cryptocurrencies include Bitcoin, Ether (Ethereum), Litecoin, Ripple
It can be said that cryptocurrencies have some features of a solid investment asset. To illustrate, Bitcoin like gold has a limited supply embedded in its software (only 21 millions Bitcoin can be mined in total).
Below are some key investment features about cryptocurrencies
Easy to buy
Highly volatile (In late 2017, Bitcoin reached a high of nearly $20,000 and left many early crypto investors feeling like they had made the right choice)
Gold vs Cryptocurrency?
In the past year, it can be said that gold has been a better bet compared to cryptocurrencies. In fact, most of the cryptocurrencies have fallen in price dramatically.
Gold has been around since ancient times and has credibility as an investment. Cryptocurrencies are very much new to the market and are a volatile asset, for now,
We believe that gold will do better than Bitcoin for the upcoming year, and are happy to hear your opinion in comment.