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Investor’s Dilemma: Bitcoin Vs Digital Gold

6 Mins read

You probably can not recall the last time you talked to someone, and the topic of cryptocurrency did not come up. However, it is inevitable to know and talk about cryptocurrency in this day and age. Since the rise of cryptocurrencies like bitcoin, dogecoin, tether and ethereum, investors have been in a dilemma. The huge predicament is whether to trade in cryptocurrency, the new digital currency or invests in digital Gold, the traditional way. The new dilemma bitcoin vs gold

Let us break it down and simplify it for you.

bitcoin vs gold for investment

Comparing The Two: Cryptocurrency Vs. Gold

Bitcoin was created in 2009 and is the only currency that does not have a single administrator. It is a decentralised digital currency. Cryptocurrency is traded from user to user, and no authority regulates it. Bitcoin has a market capitalisation of 1 trillion U.S dollars. On the other hand, Gold is a safe-haven asset because it does not correlate to the stock market or currency. Therefore, digital gold investment has an advantage during a time of crisis.

Gold and cryptocurrencies are simply very different as assets

The similarities cited between gold and cryptocurrency arises from certain perceptions and the comparison is simplistic. As analysed by World Gold Council in their detailed report, these two are fundamentally different in the following ways:

  • Gold has demand in various fields unlike cryptocurrency e.g. jewellery, Investment, industry etc.
  • Gold mining is equally distributed around the globe, while bitcoin is now mined by few key participants
  • cryptos have given high returns but have added significant risk
  • gold is a much stable, high quality liquid asset and portfolios with cryptos may benefit from higher allocations to gold
  • evolving regulatory frameworks may change the value proposition of cryptocurrencies

Should You Invest In Digital Gold Or Digital Currency?

Alan Greenspan said that “Gold has special properties that no other currency can claim. For more than two millennia, Gold has had virtually unquestioned acceptance as payment. It has never required the credit guarantee of a third party.” 

There is no doubt that Gold has been around for more than 5000 years. That is a very long time. The first cryptocurrency, Bitcoin, was invented only in 2009. People value investing in Gold because it is a commodity that has provided security in times of financial crisis. However, cryptocurrency is not an excellent monetary substitute. While it has had a high market capitalisation in the last few years, there is no guarantee that it will stay on its present course in the coming years. Hence, Gold has value, transparency and safety.

Both Bitcoin and Gold are rare. There are only 21 million Bitcoins that will be circulated by the year 2140. We are still unfamiliar with the information regarding when we’d mine all the Gold from the earth. Bitcoin does not have any utility, and neither is it an accepted form of a transaction at most places. Cryptocurrency is illegal in many countries.

According to an analysis by the World Gold Council, Gold is still the most effective commodity investment in a portfolio since it continues to stand apart from the commodities complex. Gold is a differentiated asset because of these six characteristics :

  • Gold has delivered superior absolute and risk-adjusted returns to other commodities over multiple time horizons
  • It is more effective diversifier than other commodities
  • Gold outperforms commodities in low inflation periods
  • It has lower volatility
  • Gold is a proven store of value
  • It is highly liquid.

Advantages Of Buying Digital Gold

Quality

The Gold you buy online is 24K certified and 100% secured. The seller is responsible for storing your Gold safely.

No Minimum Limit

You can buy digital Gold for as low as rupee 1. There is no lower limit on the purchase of digital Gold, and you can buy it in small quantities.

No Custody Fees

There is a hefty fee involved in storing your physical Gold at banks. However, there is no such hassle when you buy digital Gold—the responsibility to keep gold shifts from the buyer to seller. 

Safety

Buying digital Gold keeps it safe from theft or loss. The seller also has a backup reserve of Gold.

Redemption

You can redeem digital Gold at your convenience. For example, you can exchange your digital Gold for gold bars, jewellery and money.

Loans

You can use digital Gold as collateral for loans. It is valid and genuine. 

Disadvantages Of Buying Digital Gold

No Regulator Or Authority

Although the purity and quality of digital Gold are up to mark, there is no regulatory authority overseeing the transaction between the buyer and the seller. Therefore, the responsibility for the safety of Gold is solely on the seller. 

Holding Charges Are Applicable

The maximum holding period depends on the seller or trading company. Beyond that, the buyer has to either pay the holding charges or convert digital Gold into physical Gold. The maximum holding period can be up to 5 years, depending upon the trader. 

GST On Digital Gold

A GST of 3% is levied on both physical and digital Gold. 

Investment Limit

While purchasing digital Gold, there is an investment limit of INR 2 lakhs on most portals. 

Advantages of Investing In Cryptocurrency

Transactions are cheaper

When you make transactions with institutions that accept cryptocurrency, you will not have to pay any intermediary or additional fees. 

Safe Transaction

With changing technology, cyber crimes are increasing as well. There are speculations that cryptocurrency is more secure than other transactions. Personal details and identity are safe during the transaction of cryptocurrencies. 

No Monopoly

The decentralisation of cryptocurrency keeps it free from monopoly. Therefore, nobody can change the flow or value of this digital currency.

Disadvantages of Investing In Cryptocurrency

Illegal Activities

It is troublesome to trace any particular person exchanging cryptocurrency. There are countless instances of making deals for illegal criminal activities using cryptocurrency on the dark web. 

Volatility

The crypto market is highly volatile, and numerous people have suffered more losses than gains. The value of these coins changes significantly in a short period. 

Tax

Taxpayers have to mention crypto-trading while filing taxes. However, it is still unclear and vague how much value will the tax be. 

Loss Of Data

If you lose the private key to your crypto wallet, it is almost impossible to get it back. It will result in your wallet getting locked, and in turn, financial loss. 

No Cancellation

If there is a dispute between two parties, there is no way the sender can retrieve the coins. Likewise, if you accidentally send the crypto funds to the wrong wallet, you can not get them back. Because of this, there has been an increase in cyber-attacks and scams. 

Mismanagement 

 Since Bitcoin, the first-ever cryptocurrency gained momentum in 2009, several other cryptocurrency startups have followed. However, it is essential to do thorough research before investing in cryptocurrency because it is unsafe and reliable. 

 Effects of crypto-mining 

Mining cryptocurrencies is energy-intensive because it needs computational energy and electricity input. Cryptocurrency miners usually are in countries like China because of their use of coal to produce electricity. The carbon footprints of China have increased tremendously. Cryptocurrency mining is harmful to the environment.

Buying digital Gold is an excellent, safe and profitable investment. It diversifies your portfolio as well as gives you a security cushion in times of financial instability. Buy Digital Gold from India’s best platform for gold and silver investments. Start a gold savings plan and get Gold at your doorstep. 

How To Buy Digital Gold

  1. Select a genuine e-wallet or app to buy digital Gold. Example: Paytm, GoldLane, Google Pay.
  2. Keep a close watch on the market rate on the portal. 
  3. Enter the amount you’d like to purchase by weight or price.
  4. Continue to pay.
  5. The seller will deposit the Gold in the digital locker. You can access it any time.
  6. It depends on you if you want to hold, sell or get it delivered to your house in the form of coins. 

Key Takeaways:

  1. Cryptocurrency is not issued or regulated by any authority or bank.
  2. Gold is a safe-haven investment.
  3. There is no minimum weight or price required while buying digital Gold.
  4. Unlike cryptocurrency, Gold is regulated and overlooked by an organisation. 
  5. Investing in digital Gold is more safe and stable. 
  6. Gold investment is much more accessible to people from all backgrounds than cryptocurrency. 
  7. Investing in digital Gold is a more mature asset than cryptocurrency.
  8. Cryptocurrency is highly volatile. 
  9. Only three companies are offering digital Gold in India. 
  10. Investing in digital Gold is safe and preserves wealth.

Frequently Asked Questions

 Q.1 Is digital Gold safe?

Answer: Digital Gold has become safer than buying traditional Gold. The problem of keeping gold safe from theft and the purity of Gold do not become your concern when you buy digital Gold. Digital Gold is also insured. Therefore, investing in digital Gold is safe.

Q2. Is digital Gold a good investment?

Answer: Yes. It has high liquidity, relatively safe option for investment and has decent returns. Investing in digital Gold also helps diversify your portfolio. It is essential to diversify your money across several asset classes. Buying digital Gold reduces the hassle of keeping it safe from theft by shifting the responsibility to the seller. The seller does not charge any money to store your Gold either. All this makes digital Gold a good investment. 

Q3. What is the GST on gold purchases?

Answer: GST (Goods And Services Tax) on Gold is fixed at 3%

You have to pay 3% GST on both physical and digital Gold. 

Q4. How many companies are offering digital Gold in India in 2021?

There are only three companies that offer digital Gold in India. They are as follows:

1. Augmont Gold Ltd.

2. MMTC-PAMP India Pvt. Ltd. is a joint venture between state-run MMTC Ltd. and Swiss firm MKS PAMP.

3. Digital Gold India Pvt/ Ltd with its SafeGold brand.

Q5. Is cryptocurrency banned in some countries? 

While it is contemplated that India is going to ban cryptocurrency, several countries have already done so. It includes Turkey, Nigeria, Nepal, Algeria, Egypt, Qatar, Bangladesh, Lebanon, Ecuador, Bolivia, Morocco and China. 

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