One of the reasons why crypto has gained more respect is experts are comparing it to traditional assets, precious metals like gold, as well as strong currencies like the dollar.
Despite crypto’s popularity, some still staunchly favour gold and other precious metals and refuse to see how crypto could compete with glittering ingots, bars, coins, and crowns. However, in the midst of this booming crypto market, the argument against crypto as a safe haven asset option is looking increasingly flimsy.
It’s looking extremely likely that the wider-scale adoption of crypto, its current successes, and its winning features are pitting it over the golden oldie’s “precious” assets.
This editorial will seek to outline the benefits and negatives of investing in gold and cryptocurrencies like Ethereum respectively.
Could Cryptocurrencies like Ethereum Replace Gold as a more Secure Asset?
Since the Great Recession and the subsequent quick-fire recession during the COVID-19 Pandemic, investors are keenly aware that recessions could begin without warning. These recent events have pushed many investors to diversify their portfolios by investing in precious metals like gold. This has been a practice for thousands of years and is still considered a secure means to hedge against corrections and inflation.
However, in the last few years, many people have chosen to invest in cryptocurrencies like Ethereum (ETH) and Bitcoin (BTC) as a means to hedge against macroeconomic effects. The reasons behind this deviation from the standard gold investment are due to the characteristics and benefits that cryptocurrencies like ETH offer savvy investors. Let’s have a look at the similarities and differences between Gold and ETH.
- Regulation: there are some restrictions in place depending on the county
- Utility: multi-use precious metal used in many sectors and industries
- Liquidity: gold is a highly liquid commodity
- Tax: some gold investments are exempt from capital gains taxes
- Volatility: Gold is more secure than other investments like stocks but fluctuates in a similar way from day-to-day
- Regulation: ETH is currently unregulated by both governments and central banks
- Utility: ETH and its network Ethereum have many uses, including creating decentralised applications, in games, and in creating and innovating new blockchain technologies
- Liquidity: The market capitalisation of Ethereum at the time of writing is $198,341,170,347 (this large amount of liquidity is currently locked within the Ethereum network)
- Tax: Ethereum, like all cryptocurrencies, are subject to tax. The exact tax you’ll pay depends on where you live and the specific transactions you’re making
- Volatility: ETH is volatile; however, it’s growing in a positive direction towards stability
Why Gold isn’t a Good Decentralised Investment Option, from the Ethereum Co-founder Vitalik Buterin
In a recent Twitter exchange, Vitalik Buterin argues that Gold is not a good decentralised investment alternative to fiat currencies and stocks.
Vitalik Buterin replied to Zach Weinersmith’s question on Twitter about the suitability of gold as a decentralised financial system. The three reasons which Buterin gave clearly outline why cryptocurrencies have succeeded in the current global marketplace and are poised to become a mainstream investment option. As they have fewer restrictions, can be transferred easily and securely even with untrusted parties, and can be stored securely without a central authority in control of it.
Buterin also argues that crypto is better because it has more adoption than gold. Another Twitter account mentioned that because of asteroid mining for precious metals, gold could lose its value in years to come. Finally, the fact that 19% of all the gold is held by national banks across the world as a reserve means that it’s not a fair currency.
Comparing and Contrasting Ethereum and Gold
The volatility of ETH, among other cryptocurrencies, is what turns many people away from investing. The relative stability of gold, however, attracts investors as well as its utility and demand in multiple sectors. But then again, the same can be said of Ethereum. Its stability is greater than many other cryptocurrencies, its uses are more scalable than gold, and it has a huge amount of momentum which hasn’t dissipated despite market conditions. There is no clear winner, but instead, two options should be considered alongside their respective risks.
The reason why people are increasingly moving towards cryptocurrency investment like Ethereum is that if you analyse and assess your risks carefully and you have enough resources to invest, you can make a lot of money in a very short span of time. It comes with risks, of course, but Ethereum’s high yields seem to be the defining characteristic which pits cryptocurrencies over gold investment at the moment. Because even though gold may be the more stable option, it isn’t immune to market fluctuations and macroeconomic effects, and it takes a long time to 10X your investment.
Final Thoughts and Mentions
So it really comes down to what kind of risks you are prepared to take and what you need your investment to achieve in what timeframe.
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For more information on Big Eyes Coin (BIG) and its community, please visit the following links:
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