Bitcoin’s recent wild ride rivals anything available at Disneyworld. The volatile cryptocurrency has made princes out of paupers, and, with the recent tumble that brutally annihilated 40 percent of Bitcoin’s price, the paper princes are asking some serious questions. Last year’s 1,400 percent surge in Bitcoin value had many crypto-investors thinking the digital currency was unbeatable. That attitude may be undergoing a change.
This past month, some gold dealers are seeing their sales taking a huge upswing. Many Bitcoin owners are trading their digital assets for the real thing. London-based gold dealer, Ross Norman, is seeing many young investors who jumped on the Bitcoin bandwagon and made their fortune, many having bought the cybercurrency at $1.00. Bitcoin has been good to many investors. But just how long can it last?
Gold has been around for thousands of years and has proven its permanency. It’s that very historical stability that has many investors giving it a second, and even a third, look. CoinInvest, an online precious metal dealer, sold $1.2 million dollars of gold on the day Bitcoin fell by 43 percent. Bitcoin’s recent turbulence has made gold dealers like Ross Norman and CoinInvest very happy. Even as the price of Bitcoin is rallying, investors are questioning its sustainability for the long haul. Previously euphoric Bitcoin owners are showing considerable appreciation for solid, physical assets that have proven to be less erratic and risky. The actual value of gold may go up and down, but as a finite commodity, it will always have value.
Bitcoin and gold do have some common attractions for investors. Both offer anonymity, is decentralized and can be used anywhere in the world, at all times. Perhaps, most importantly, both Bitcoin and gold are in limited supply. Still, while Bitcoin has been responsible for many a recent happy dance, many revelers are considering leaving the party. In everyday terms, the difference between Bitcoin and gold may be the difference between having a real, live girlfriend versus an online relationship. The first is tangible and real. The other could be anyone. One offers certainty, while the other is clouded in a lot of digital vagueness. For investors, the uncertainty may not be worth the payoff.
Physical gold has always been a safe haven for investors. This haven doesn’t constitute protection against all investment turmoil, but it does protect against the worse type of tsunamis. Can an intangible, digital investment contract offer this kind of safe haven? The answer is, it cannot. The digital contract can ensure against a loss, but it cannot prevent the loss from occurring. And there is no guarantee of the loss being compensated in the event of bankruptcy and other financial difficulties. Gold, as a tangible asset, can prevent catastrophic loss in the first place and is immediately available in case of emergencies.
The immediacy of gold in case of disaster cannot be discounted. Gold does not require electricity to become accessible. While we tend to take electricity for granted, the recent hurricanes in Puerto Rico have left 90 percent of the population without power. Puerto Rico is conducting business on a cash-only basis. Gold can be turned into cash. Cryptocurrency, during or after a natural disaster, cannot. India imports record amounts of gold each year in preparation for its destructive monsoon season. The fact is, catastrophes, whether manmade or natural, is one of the very reasons for gold’s popularity. The yellow metal is immediate currency when everything else is in an upheaval.
Many financial experts are concerned about cryptocurrency turning into another “bubble,” such as the dot.com bubble or the housing bubble, both of which had some ruinous endings for many investors. The very fact that Bitcoin has turned mainstream leaves it open to manipulation and fraud, according to JPMorgan and Goldman Sachs. If Bitcoin is responsible for the creation of newly-minted princes, can it also reveal, in the end, that the emperor has no clothes? At the moment, its future is still uncertain.
The US is facing record consumer debt, a declining dollar, and looming inflation. With these concerns, gold is expected to appreciate in value. As a hard asset, gold has been around for a long time, and many are betting that it will continue its longevity.
