Precious Metals
In an era in which inflation remains problematic and recession remains a threat, many Americans are looking for safe haven assets to protect their financial well-being. And while traditional safe haven assets like gold and silver remain perennial favorites, there are new entrants to the scene looking to compete.
Among them is Bitcoin, which its many proponents like to refer to at times as “digital gold.” Bitcoin was developed with an eye towards overcoming the problems with fiat currency, but can it really compete with gold as a safe haven asset?
The next recession or financial crisis will be the first big test of Bitcoin’s ability to serve as a safe haven during a crisis. So let’s look a bit closer at Bitcoin vs. gold and see if either one might be right for you.
First, let’s take a look at some of the advantages of gold. There are numerous reasons that gold has maintained its popularity as a safe haven asset for such a long time.
Gold has a nearly universal appeal as a safe haven asset and a store of wealth. For millennia, civilizations around the world have valued gold.
From the Bible, to India and China, to the modern day, gold has always been seen as a marker of wealth. No other metal, or asset, has that kind of universal appeal.
That means that gold also is in demand all over the world. If you need to buy or sell gold, gold markets around the world operate nearly 24/7, ensuring a steady supply of gold for buyers and sellers.
In a world in which so much of our wealth and so much of our data is held in electronic form, having tangible physical goods and assets has a value all its own.
For many people who are worried about the safety and security of the money they hold in a bank, or the tax-advantaged savings they hold in retirement accounts, the ability to own valuable tangible physical assets that they can place their hands on can give them extra peace of mind.
With gold, that tangibility can come in the form of physical gold coins and bars that are stored at home, or in the form of physical gold coins and bars held by a gold IRA. With a gold IRA, distributions can be taken either in cash or in physical gold.
Gold is a compact store of wealth. All the gold ever mined in the history of the world would cover a soccer field to a depth of one meter. That’s not a huge amount of physical gold.
A roll of 20 one-ounce gold coins could fit in your pocket, but is valuable enough to buy a nice car. And because gold markets operate all over the world, there are always ready buyers and sellers of gold, making it one of the most liquid assets there is aside from straight cash.
Gold has been trusted as an inflation hedge for decades. Its ability to maintain its value and purchasing power no matter what is transpiring with paper currencies can make it a valuable asset for those looking to protect their wealth against inflation.
Since 1971 the US dollar has lost over 87% of its value, while gold has risen in value over 6,000%.
If you buy gold to store at home, no one has to know that you own it. There are no reporting requirements, no forms to fill out.
Owning physical gold is a lot like owning cash. And while there are tax requirements when it comes to selling gold, during your period of gold ownership you don’t have to worry about any sort of tax consequences.
Bitcoin was developed to be an electronic currency that rivaled both the US dollar and gold. Here are some of Bitcoin’s advantages.
Bitcoin sought to overcome the problem inherent in the US dollar and other modern fiat currencies which have a centralized issuer, namely the inherent tendency for the central issuer (the central bank) to create ever more units of the currency, which is inflation and results in higher prices.
Bitcoin developed a decentralized method of currency issuance in which there is no single issuer of bitcoins. And the Bitcoin supply is limited to 21 million coins.
Once those coins are all mined, there will be no more created. So rather than getting less valuable over time as each US dollar is, each bitcoin will get more valuable, kind of like gold.
Bitcoin was originally set up to be a means of payment as well as a store of value. Bitcoin transactions were developed to settle nearly instantaneously, making it an advantageous method of payment for both online and point of sale transactions.
Bitcoin also allows individuals to easily store their Bitcoin holdings, enabling them to become their own banks. And because Bitcoin transactions are so seamless, it also enables people to make international transactions quickly and easily, bypassing the banking system and reducing the need for a wide variety of foreign currencies.
While Bitcoin’s detractors often like to deride it as an anonymous cryptocurrency used by criminals and terrorists, that isn’t true. Bitcoin is pseudonymous, not anonymous.
Bitcoin holdings are tied to various Bitcoin addresses, and every single transaction of bitcoins is tracked and stored on the blockchain in perpetuity.
Unless your Bitcoin address can be tied to your identity, however, no one knows who is doing what. While much of Bitcoin’s pseudonymity is being undone by the use of exchanges which are subject to know your customer and anti-money laundering legislation, there are still undoubtedly many Bitcoin addresses whose users are unknown.
While Bitcoin may not offer all the same anonymity as cash, it comes pretty close.
One of the most attractive aspects of Bitcoin is its meteoric price growth. Once worth mere fractions of a penny, each bitcoin is now worth over $70,000. The famous “Bitcoin pizza” transaction in May 2010 that cost 10,000 BTC for two pizzas is now worth $700 million.
The allure of easy money drew many people to Bitcoin, who thought the Bitcoin price would only ever move upward. And while Bitcoin’s rate of price growth has slowed as the technology has become more mature and widely adopted, its rate of price growth has still been pretty astounding, with a more than 700% gain over the past five years.
Now that we’ve taken a closer look at the advantages of gold and Bitcoin, let’s take a look at some of gold’s disadvantages.
One of the obvious risks with gold is the threat of counterfeiting. In other words, how do you know that the gold you’re buying is actually authentic?
Fortunately there are ways to ensure that you’re not getting taken for a ride. If you’re knowledgeable and experienced with gold, you can use calipers, scales, and even acid tests to ensure that the gold coins and gold bars you buy are real.
Or, you just skip all the sketchy online marketplaces and chat boards and work directly with trusted vendors to buy gold. At Goldco we work directly with mints around the world to source gold coins and bring them to you, ensuring that the gold coins you buy are 100% authentic.
Because of gold’s value, keeping it stored safely and securely will be an issue. That’s particularly true if you’re starting a gold IRA through a 401(k) rollover, in which you could easily be buying $50,000 to $100,000 or more of gold.
Depending on how much gold you buy and how you choose to buy it, you could choose to store it at home in a safe, put it in a safe deposit box, or store it at a bullion depository. But each of these choices comes with certain risks and costs.
The more safe and secure you want to keep your gold, the more it is likely to cost you. And even though those costs may only be a few hundred dollars a year, it still will eat into any price gains your gold makes.
Gold coins and bars are also dense and heavy. And while they can be portable, they’ll also feel heavy.
If you own large amounts of gold, say, well into six or seven figures, your gold holdings will be very heavy and bulky. That could make it inconvenient to move around.
All gold assets aren’t the same. While owning physical gold coins and bars remains popular, there are some alternatives, like owning gold exchange-traded funds (ETFs), or owning shares in gold mining stocks.
The disadvantage of gold ETFs is that you don’t actually own gold, just shares in a fund that claims to own gold. And you can’t convert those shares into gold.
The disadvantage to gold mining stocks is that even if the price of gold is going up, there’s no guarantee that the price of gold mining stocks will increase. Even if revenues from gold mining increase, energy costs, political instability, labor unrest, and environmental cleanup can all take a toll on miners.
Let’s now take a look at the disadvantages of Bitcoin, which are not insubstantial.
One of the biggest knocks on Bitcoin is that it isn’t a tangible asset. It’s purely ephemeral, existing in the 1s and 0s on a computer hard drive somewhere.
While that may not be an issue most of the time, and isn’t that much different in practice than many of the assets we own today, there may come a time when tangibility is needed. Particularly when times get tough is when people want the security of valuable tangible physical assets, which is one reason gold is so in demand as a safe haven asset.
Because Bitcoin is a cryptocurrency, it requires electricity to operate, and lots of it. Whether you store Bitcoin on an exchange or on a personal device, you need to have electricity to access it and to exchange it.
When the grid goes down, what do you do? While there are workarounds to use Bitcoin as a currency using cell phones and meshed networks, you still need electricity to power those phones and networking devices.
In a world with no electricity and no way to charge and power electronic devices, Bitcoin just isn’t possible. That’s why gold has remained such a popular safe haven asset for SHTF types of situations.
While the US government has thus far taken a soft hand with regard to regulating Bitcoin, the same can’t be said for other countries. China long ago banned Bitcoin mining and trading, and other nations could follow suit.
Even the US could eventually lose its tolerance for Bitcoin and other cryptocurrencies, particularly if it decides to introduce a digital dollar or other central bank digital currency (CBDC). So while Bitcoin may be free and legal right now, there’s no guarantee that the government won’t crack down in the future.
Bitcoin may be great right now, but as we all know with technology, something later and greater always comes along. Who’s to say that 10-20 years from now some newer, better, faster cryptocurrency doesn’t come along and usurp Bitcoin’s position?
While gold has a track record going back millennia, Bitcoin has only been around for about 15 years, so its long-term viability is still up in the air.
Another of Bitcoin’s supposed advantages was that transactions couldn’t be backed out. This was supposed to eliminate the possibility of chargebacks, a perennial thorn in the side of businesses everywhere.
While this was intended to ease Bitcoin’s adoption by businesses as a means of payment, it’s not the greatest for consumers. If your Bitcoin holdings are hacked, and bitcoins are moved from your address to another one, there is no way to reverse that transaction.
The best you can hope for is that some government agency might eventually take control of the address that ended up with your bitcoins and give them back to you, but that’s wishful thinking. That’s why proper security procedures are absolutely essential when it comes to storing Bitcoin.
The flip side of Bitcoin’s price growth is its tremendous price volatility. More than once, Bitcoin has soared to all-time highs, then crashed significantly.
With only a 15-year price history, there’s no way to tell where Bitcoin will be 15 years from now. It could be ten times higher than it is today, or it could be worthless. There’s just no way to tell.
One of the selling points of Bitcoin was that it enabled everyone to become his own bank. You could store all of your Bitcoin wealth in your Bitcoin wallet and carry it wherever you wanted to.
But along the way, various cryptocurrency exchanges popped up to help facilitate the trading of Bitcoin and other cryptocurrencies. Many of these exchanges also offered custodial services, allowing Bitcoin owners to keep their Bitcoin in the exchange’s wallets rather than their own.
This centralization made exchanges a target for hackers, and they also provided an opportunity for fraudsters to create exchanges in order to accumulate large amounts of cryptocurrencies they could siphon off.
The recent case of FTX, a multi-billion dollar fraud, is but one example. With so much money being conjured up in the cryptocurrency sphere, and with cryptocurrencies being so prone to hacking, theft, and fraud, cryptocurrencies will continue to be a target for fraudsters around the world.
The next recession should determine whether Bitcoin will live up to the hype as digital gold, or whether it is dramatically over-hyped. But in the meantime, gold should continue to live up to the expectations gold owners have for it.
Already the yellow metal has seen recent all-time highs of over $2,400 an ounce, and we haven’t even entered into recession yet. Once the US economy actually enters into a recession, gold could climb even higher.
If you’re worried about the direction of the economy and want to protect your hard-earned savings, which would you rather choose: the proven safe haven with thousands of years of experience behind it, or the upstart with less than two decades of history?
When it comes to protecting your wealth, gold has a strong track record. And if it performs as well during the next recession as it did during the 2008 crisis and its aftermath, gold owners are going to be very pleased.
With over $2.5 billion in precious metals placements and over 6,000 5-star reviews from our customers, Goldco has worked hard to make itself one of the best and most trusted gold companies in the country. Call Goldco today to learn more about how you can safeguard your savings with gold.
Free Precious Metals Guide
Complete the Form Below
Free Precious Metals Guide
Complete the Form Below
Many Americans today are looking at ways to help safeguard their wealth With growing economic uncertainty, more and more people are worried about the possibility of recession or other financial...
With the potential uncertainty growing all the time, more and more people are looking at ways to help safeguard their wealth against the possibility of recession and financial turmoil Millions of...
With fear of potential recession growing and inflation rising , more and more Americans are looking to help safeguard their assets Many are choosing to buy precious metals like gold and silver,...
CUSTOMER CARE
DISCLAIMER: This site is general in nature and not tailored to the specific goals of any individual. Purchasing precious metals may carry risk. Some of those risks associated with precious metals include the following: prices may rise and fall, which means the value of your metals may go up or down over time and you may sell for more or less than you paid. Past performance does not guarantee future results. Goldco cannot guarantee, assure, or promise future market movement, prices, or profits. Customers should understand that all purchases have some degree of risk. Customers should make certain that they understand the correlation between risk and return. Commodities involve risk and are not suitable for all investors. There is no assurance that commodities, i.e. precious metals, will achieve their objectives. Return and principal value will fluctuate and your portfolio, when redeemed, may be worth more or less than the original cost. Even though Goldco and its representatives are precious metals specialists, we are not licensed financial advisors and do not give financial advice. Additionally, Goldco cannot provide tax or legal advice and will not advise as to the tax or legal consequences of purchasing or selling precious metals or opening a Precious Metals IRA. Individuals should consult with their investment, legal or tax professionals for such services.
