Bullion has been used as a form of currency for centuries, while Bitcoin was created in 2009 and started as an open-source project. Bullion is a precious metal converted to a ‘coin’ or ‘bar’ and is considered a reserve asset of a bank and a country.
These two investments are similar in the way that people consider them as safe-haven assets. Their distinctive difference is that Bullion has a guaranteed value since it’s a gold-backed currency. On the other hand, Bitcoin is an online virtual currency that isn’t backed by any government or bank.
There are many similarities and differences that you need to know to make an informed decision on which between the two is the better investment. To help you out, read through this article as it put together a comparison of Bullion and Bitcoin, as well as the pros and cons of investing in them.
Both Are Safe-Haven Assets
Safe-haven assets are those that won’t lose their value in times of economic crisis. Bullion And Bitcoin are both perceived to be safe-haven assets as people believe that their value won’t diminish and they’ll continue to be worth the same or more in the future.
Both Are Reliable Hedges Against Inflation
The inflation rate is when the general price level of goods increases. Bullion and Bitcoin are both hedges against inflation because they aren’t influenced by the price of goods as they’re stores of value.
Both Are Limited Assets
The total supply of Bitcoin is limited to 21 million only. Thus, it’s expected that as Bitcoin becomes popular, its value might increase since the demand for the limited supply continues to increase.
The total supply of bullion might be unlimited as it depends on the quantity that has been mined. However, the process of mining them is limited by physical constraints. That’s why the circulating supply still is considered limited by many as it can’t be infinitely increased even if there’s a high demand for it.
Digital Asset Vs. Tangible Asset
Each form comes with its pros and cons:
Pros Of Bitcoin (Digital Asset)
- As mentioned, since it’s decentralized, it means that it’s not controlled by any government or central bank. This is good because it means that the value of Bitcoin will have nothing to do with monetary policies.
- Transactions are more convenient and secured as it uses the Blockchain
- It’s permissionless. Anyone can access and use Bitcoin through the Internet without going through a lengthy process.
Cons Of Bitcoin (Digital Asset)
- It’s not tangible. Thus, you can’t physically possess it unless you have a digital wallet and access to the internet.
- It’s risky to store as it can be stolen by cybercriminals.
Pros Of Bullion (Tangible Asset)
- You can have it physically in hand as long as you have the access to a secure vault.
- It’s not as risky as digital assets because they can’t be stolen by cybercriminals. It can only be stolen from you physically.
Cons Of Bullion (Tangible Asset)
- Transactions are more inconvenient as it requires more effort and time to physically move or transfer them from one point to another, making them difficult to use for everyday transactions.
- Storing it might be expensive, especially if you possess a great amount. If this is the case, you need to have a very secure vault.
Store Of Value
Bitcoin is more volatile compared to Bullion. Bitcoin’s price history shows that its price has fluctuated massively over the years. In comparison, Bullion undergoes a constant valuation.
Return Of Investment
Since Bitcoin’s market is volatile, its ROI is also volatile. The higher the risk you take, the higher the reward or loss you’ll make. On the other hand, the ROI of Bullion is steady and predictable. It may not reward you as high as Bitcoin, but it’s stable and safer.
Viability As Currency
More and more people are using Bitcoin in transactions. Even though it isn’t that prevalent compared to Cash or Credit card yet, but stores and other businesses are starting to accept it.
Bullion, on the other hand, can’t be used as a currency. It’s only used as a store of value and can’t be used to buy products directly.
Bitcoin and Bullion have their own pros and cons. For one, Bitcoin gives more freedom to the investor and it allows them to transact easily. However, it’s risky due to its volatility. Bullion, on the other hand, is more stable and reliable but it can’t be used for everyday transactions.
You must decide what to choose based on your own experience, risk tolerance, and investment goals. Just remember that you can’t go wrong with either choice as they both have their own advantages and disadvantages.