Gold vs Bitcoin: In the last few years, the trend of investors has increased rapidly with investments in cryptocurrencies like Bitcoin. Investors are adding this to their portfolio. Generally, most investors consider investing in crypto as investing in gold. In some cases, gold and crypto are being said to be the same due to similarities and almost equal reasons for investment, but these two options have different meanings. Both gold and crypto are thought to be similar due to their limited supply and their role as an alternative to fiat currencies (currencies issued by central banks), although the other two have different practices.
Since 2016, worldwide gold stocks through mining have been growing at a rate of 1.7 per cent annually and have remained the same trend for the last 20 years. In comparison, Bitcoin stock is growing at the rate of 3 per cent per annum, but by 2140, its annual growth will be zero per cent.
Gold is also an option for consumer goods with investment
All cryptocurrencies, including bitcoin, are non-tangible (which cannot be touched) assets and are included as an investment in the portfolio. On the other hand, when it comes to gold, it is also tangible (which can be touched) assets (physical gold) and also non-tangible (digital gold). Apart from investment, gold is also consumed, such as in jewelery, technology. According to 10-year average data, 34 percent of the annual gold demand is from jewelery, 7 percent from technology and 17 percent from central banks and the remaining 42 percent is invested. Gold is also used in computers, mobile phones as well as in the technology using which cryptocurrencies are mined.
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More diversity in gold ownership
Gold mining is done all over the world and most of it is mined in China, Russia, Australia, America and Canada. However, in terms of annual production, less than 10 percent gold is produced in the continent of Europe and more than 10 percent and less than 25 percent gold is produced in the rest of the continent. Along with the production of gold, there is also diversity in its ownership.
The US Treasury holds the largest amount of gold in the world, but only four per cent of the worldwide gold stocks. 50 per cent gold exists only in the form of jewelery and 21 per cent in the form of gold bars, coins and gold ETFs with individual and institutional investors.
In comparison, in terms of bitcoin, five big mining companies are from China and have control over 49.9 percent of this network. Apart from this, only 2 percent people have 95 percent of the available bit coins when it comes to holding bit coins.
Bitcoin four times more volatile
In the last year 2020, Bit Coin gave almost four times the returns and in the last two years it gave about 9 times returns to the investors. However, there is a very strong risk on investing in it. Talking about the last two years, it is three times more volatile than the S&P 500 and four times more than gold.
Bitcoin may be banned in India
Policies are being formulated around the world about cryptocurrencies like Bitcoin and this will affect their value. Private cryptocurrencies like Bitcoin can be banned in India. Such a bill is to be considered in this budget session through which private cryptocurrencies will be banned. The bill will pave the way for the official digital currency to be issued by the central bank Reserve Bank of India (RBI).
There are no set guidelines regarding cryptocurrency in India right now. Three years ago, in 2018, the Reserve Bank of India (RBI) issued a circular regarding cryptocurrency. According to this circular, the central bank was banned from providing any services related to cryptocurrencies to regulated entities. After this, the case went to the country’s largest court, the Supreme Court. The Supreme Court rejected a ban imposed by the RBI on cryptocurrencies in March 2020 last year. Since then, investment in Bitcoin in India is entirely at the risk of investors because there is no regulation related to it right now.
(Input – World Gold Council Report)