Cryptocurrencies and gold: You need to take a position

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Cryptocurrencies and gold: You need to take a position

Cryptocurrencies and gold are often written about as either / or positions for an investor’s portfolio as they act as an alternative to currencies but they have can work well in combination

Any trader looking to make money on cryptocurrencies and gold markets needs to invest time researching before taking a position.

If you do a search on cryptocurrencies it won’t be long before you’ll see an article that compares their merits against gold.

Should you invest your hard-earned money in gold or cryptocurrencies? They ask, and variations on that theme.

The number of these articles implies that they are somehow in competition with each other.

But it’s a phoney war. Both have a different role to play in the world of finance and in your portfolio.

Gold offers stability

One of the reasons gold has stood the test of time is the stability it offers against the unpredictability of currencies and the sudden collapses that have taken place throughout history that can wipe out fortunes in an instant.

Gold is the perfect way to hedge against risk, impervious to natural, financial or political disasters.

Cryptocurrencies also offer a viable alternative to traditional currencies because they are decentralised, meaning no central authority can take it away from you.  

But they differ in tangibility. Gold has been around forever and relied upon for centuries. Cryptocurrencies have no history, they are so new people are still waking up to them and their possibilities.

The sense of value that comes in physically holding gold can’t be replicated by cryptocurrencies. They don’t ‘feel’ as safe as gold because they rely on an internet connection, they can’t be seen, they can’t be held.

Cryptocurrencies are the future

But in reality, very few people reading this will have actually bought anything with gold. The likelihood is that most never will. However, there is a strong possibility that some will make a transaction with a form of cryptocurrency in the future.

Their full role or use hasn’t been fully explored or understood which has led to sceptics expressing caution. Ray Dalio of Bridgewater Associates is concerned that Bitcoin (a leading cryptocurrency) is a speculative market that was a bubble.

JPMorgan chief Jamie Dimon went even further. He described it as a fraud and warning that he’d fire any trader he caught buying or selling it.

But Bitcoin and other cryptocurrencies are necessary because people are losing trust in money. Gold offers the sense of security people are looking for but it lacks genuine usability.

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