Riskier Investment with High-Potential-Gain Profit vs Secure Low-Margin Long Term Investment
Choosing what type of Investment to put your money in is a serious step that requires different considerations. There are a host of investment opportunities with cryptocurrency being the latest. As the world is evolving digitally and there is more advancement in technology, there is a constant and unending search for the next invention that will improve our everyday life and make it easier.
Cryptocurrency has struck the attention of the world who have found it to be a simple, straightforward, and safe form of payment.
Gold, on the other hand, has been one of the most desirous items since time immemorial. For centuries, investors have invested in gold and made good returns on their money-making gold a safe and reliable investment item.
Choosing between cryptocurrency and gold can be a tricky question depending on what you’re looking to achieve. This article sheds light on cryptocurrency and gold and gives you all the information you need on choosing in which of them you should put your money.
Investing in Cryptocurrency
What Is Cryptocurrency?
Cryptocurrency is a digital currency with a stated value attached to it. It’s a digital asset that you can use for online purchases. Just like dollars or other currencies, you exchange “coins” or “tokens” of a particular Cryptocurrency for goods and services.
There’s a worldwide buzz around Cryptocurrency at the moment and people are rushing to get in on the action. Many believe it’s a modern-day gold rush while others believe it’s here to stay. Famous names such as Elon Musk have thrown their weight behind Cryptocurrency and it’s such that it can no longer be ignored.
How Does Cryptocurrency Work?
Cryptocurrency works like regular currency only that it’s decentralized and has no central bank or regulating body which can determine its value. Cryptocurrency is exchanged from person to person and it can rise and fall in value.
How Is Cryptocurrency Stored?
You keep your dollars in the bank and Cryptocurrency is similar. You keep your Cryptocurrency in something called a digital wallet which is usually an app similar to your bank app. Your cryptocurrency is a digital currency and it’s with your digital banker who designs multiple apps with which you can buy, sell, and manage your Cryptocurrency.
To keep track of Cryptocurrency transactions, there is something called blockchain technology which is like a long receipt that keeps growing with each exchange of crypto. It’s a public record of all of the transactions about a particular cryptocurrency. Similar to a ledger that keeps the record of all transactions on a particular currency.
Types Of Cryptocurrency
There’re several types of bitcoin some more famous and stronger than others. Just like currencies where the dollar and the pounds and stronger than other third World currencies.
These are the three major types of Cryptocurrencies.
These are the dollars of Cryptocurrencies. It’s the poster coin for Cryptocurrencies and the most valuable of the bunch. Created in 2009 by an unknown person with the tag name Satoshi Nakamoto. Bitcoin is the top choice for investors because of its strength and high value.
This is the second on the most popular list. Ethereum is also valuable and uses a crypto coin called ‘Ether’. Ethereum is a bit more complex because it allows its users to “mine” their coins. Mining is the process whereby people use supercomputers to solve super complicated math problems that make sure new crypto transactions are correct, which adds to the blockchain (receipt). These miners are then paid in Ether coins.
Dogecoin is the youngest of the big 3 and it’s the hottest at the moment because it is still relatively affordable. Dogecoin is popular and the demand for it rises its value.
These are the three most valuable and popular coins. If you’re interested in investing in cryptocurrency, these are the top 3 choices you should consider. But before you invest in Cryptocurrency, let’s see the benefits and risks attached to investing in Cryptocurrency.
Benefits of Investing In Cryptocurrency
Cryptocurrency is popular for several reasons and it’s primarily because of the benefits people enjoy from it. These are some of the benefits of Cryptocurrency.
Every transaction made with cryptocurrency is monitored and recorded in a public ledger that is known as the blockchain. These transactions can’t be changed or altered. It’s open to public verification at any point.
Just like your bank app which allows you to carry out transactions at any time of the day, Cryptocurrencies allow you to transact business anytime you want. You can transact business from the comfort of your home.
Cryptocurrency is decentralized and has no regulatory body. With Cryptocurrency, you have absolute control over your coins and tokens and you can do with it as you please. Your identity and that of the person you’re transacting with cannot be made public. You don’t have to rely on banks or fintech companies to make Cryptocurrency transactions.
High Potential for Appreciation
The biggest reason why Cryptocurrencies are attractive is that they have a high potential to appreciate. Cryptocurrencies have seen a steady increase in value and investors are queuing up to enjoy the gain.
What is interesting is that you can invest in a cheap less popular coin with the prospect of appreciating it. These types of coins can skyrocket in value in no time giving you triple your investment.
Risk Attached To Investing In Cryptocurrency
Cryptocurrency is unstable.
Cryptocurrencies have no fixed value and they appreciate and depreciate according to numerous dynamics. This is a major disadvantage of Cryptocurrencies because an indie billionaire like Elon Musk can wake up on the wrong side of his bed and crash the crypto world with one tweet.
Cryptocurrency has lots of unknowns.
There’s still a lot of uncertainty and confusion surrounding Cryptocurrencies. These unknowns make it difficult the predict the direction Cryptocurrencies might be heading. It also makes it hard to fashion out investment plans around Cryptocurrencies.
Cryptocurrency in some cases makes fraud easier.
Cryptocurrencies are decentralized and transactions are conducted anonymously. This makes it easier for it to be used for illegal purposes as it’s difficult to track such transactions.
Cryptocurrencies have an unproven rate of return.
Cryptocurrencies are somewhat like gambling because you can never really predict in what direction the market will move. Hence you can’t be sure of what return projection you stand to gain or what you might lose.
This is why you should approach investing in cryptocurrency with extreme conservatism as you can’t afford to gamble with your savings.
Investing In Gold
Having considered the nature of Investment in cryptocurrency, let’s take a look at Gold Investment. There are three ways to invest in Gold.
This is the buying of gold bars and gold coins and holding them over a period which they appreciate. You can then sell them for a profit whenever you wish to recoup your investment.
Before Investing in physical gold, you need to consider issues of storage and insurance.
You can invest in paper gold through ETFs and CFDs. This is a way to allow for digital trading to be traded electronically, which is cheaper and more efficient.
This is an investment in gold mining companies. You can buy shares in these companies and earn dividends on your investment. Gold stocks are similar to other investments in the capital market only that this time you’re investing in gold.
Advantages of Investing In Gold
Gold is a top choice for investors due to its many advantages. These are some of the advantages of investing in Gold.
Gold has a stable value which had withstood the test of time. If you are looking for a long-term Investment then Gold is the right choice for you. You can keep it as a long-term investment for your kids and grandchildren who will benefit from its steady increase in value.
Gold is resistant to the volatile nature of the capital market. While stocks and commodities crash during high inflation and economic recession, gold tends to appreciate. This makes it a good investment option.
Gold is highly desirous and a top option for investors. This makes gold very liquid and allows you to sell and buy it easily. You can easily convert your investment into cash anytime you want and this is important especially during emergencies.
It’s also advisable to diversify your portfolio by investing in different types of assets. Gold offers you a stable and safe investment option that helps you hedge your risk from the unpredictability and volatility of the capital market.
Risks of Investing In Gold
Every type of investment comes with its risks. You must know the risks attached to investing in gold so you can determine if it’s the best option for you.
Gold is an investment that often requires a large capital if you want to make the most of it. In gold, significant investment equals significant return, so it’s often a case of Go Big or Go Home.
Specialized Storage and Insurance
Storing physical gold is risky especially as it can be lost or stolen. Hence you need to keep your gold in specialized government-approved storage. You also have to ensure the gold from possible loss and all of these are quite expensive.
Speculative Nature of Value
Gold is mostly a luxury item and its value is ascribed. The price of gold will plummet should the world decide that it wants to cut down on its vanity.
Physical gold also doesn’t give you dividends unlike investment in stocks and debentures. However, you can invest in gold stock to earn dividends.
Similarities Between Cryptocurrencies and Gold
There are similarities between Cryptocurrencies and Gold. These similarities draw a fine line when you’re choosing which of the two to invest in.
Transparency, Safety, Legality
Gold’s has a system for trading, weighing and tracking is that is top-notch. It’s very hard to steal it, to pass off fake gold, or to otherwise corrupt the metal. Similarly, cryptocurrency is also difficult to corrupt, thanks to its encrypted, decentralized system and complicated algorithms.
Both gold and cryptocurrencies are very liquid and you can sell them off in the market anytime you desire.
The demand for gold and cryptocurrencies far exceeds the supply which makes them rare and also highly valuable.
Which Should You Invest In?
Choosing between cryptocurrency and gold requires that you consider your capital, plans, and what you hope to achieve.
If you’re looking for a safe and stable investment with a long-term profit then you should choose gold over crypto. Gold is less volatile and susceptible to rapid changes in value like Cryptocurrencies. Gold won’t give you the biggest return, but it’s a safe eat to protect your wealth and hedge your risk.
If you desire an investment with a higher return you can opt for Cryptocurrencies. It’s volatile and your can triple your investment in few weeks. However, it’s risky and inadvisable that you put all your wealth in Cryptocurrency.
Your 401K should be invested in a safe venture by an experienced investment manager. What we know is that any Investment Manager worth their salt will advise you against pouring your wealth into Cryptocurrency.
Both gold and cryptocurrencies have their advantages and risks. Investing in either of them requires that you carry out a comparative analysis of the two and determine which is the best choice for you.