In the context of sharply inflationary pressure in the medium and long term, which assets will become a haven for investors?
For many years, gold has been used as a haven asset to hedge against inflation risks. Because of its limited supply and being a tangible commodity, gold tends to hold its value during the high inflation period.
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However, young people today tend to prefer digital currencies in general and Bitcoin in particular over gold. Because holding digital money has much more advantages in the digital age. For example, one cannot make online purchases with gold, but it is possible to do so with digital currency. Although stores accepting digital currency payments are limited, it will be increased in the growing popularity of this crypto.
In reality, Bitcoin and gold have a limited supply. The supply of Bitcoin is capped at 21 million units, while the supply of gold is decreasing due to the limited gold reserves. Furthermore, governments cannot create Bitcoin and gold as much as printing money. That is the reason why it is believed that Bitcoin and gold are not affected by inflation.
The biggest difference between gold and Bitcoin is their appearance. Gold is a tangible asset but is also sold digitally (account gold). Bitcoin is just a digital asset. Hence, gold is a bit more flexible in this regard. It means, if the world suffers from a disaster that prevents us from using the Internet, then Bitcoin will be useless. However, this is almost impossible in practice. Besides, gold has real value, and Bitcoin is not backed by anything other than the energy used to produce them. Gold is used in many industries, such as jewelry, dentistry, electronics. So, it will always have a higher value than Bitcoin.
On the other hand, gold can be owned in one way or another. Apart from physical ownership, people also can buy futures contracts or even gold mining stocks that are somewhat correlated with gold. Moreover, investors can prevent the risk of gold price fluctuations through derivative tools, such as options, swaps, futures … While Bitcoin is heavily speculative, there is large volatility in price. After peaking at $ 40,000 / BTC, Bitcoin’s price plummeted to around $ 30,000 / BTC, then skyrocketed to $ 47,000 / BTC, while the price of gold has almost remained stable around $ 1,800 / oz by the time. Therefore, gold is often much safer than Bitcoin.
Therefore, investing in gold is still safer and more efficient than Bitcoin, although the profitability of gold is not as great as Bitcoin because the price of gold less fluctuates than the cost of Bitcoin.
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