Gold trading is a long standing tradition that can be traced back hundreds of years. Bitcoin on the other hand which is a digital currency that uses encryption and works independently of central banks has been in existence for less than ten years.
The cryptocurrency has been on a steady rise and is already starting to challenge gold as the investment of choice. It’s skyrocketing growth has been nothing short of spectacular, such that on March 3, 2017, bitcoin overtook gold for the first time since its inception, trading at US$1,290 in comparison to US$1,228 for an ounce of gold.
Most governments keep some of their reserve funds in gold. Although gold is seen as a safe investment during times of crisis is not immune to the susceptibility of the common market fluctuations that is faced by of any other form of commodity. Upon reaching its full potential, its value will be in a much more stable state.
Bitcoin is a virtual currency that is used for electronic purchases and transfers. It has recently seen a rise in popularity, and a growing number of businesses have included it as a form of purchase and payment, including Overstock.com, and Reddit. Microsoft through Windows 10 and Windows 10 Mobile platforms have long been accepting bitcoin payments, while shoppers at online store Shopify may also use it as a form of payment.
Investing in digital currencies, such as bitcoin, is emerging as an alternative to traditional forms of money and has created a niche that has been driving major innovations in the financial sector. One of those innovations is as peer-to-peer lending and digital wallets. With the gain in confidence that is experienced by traders in alternative forms of money and payment mechanisms, Bitcoin is seen as a possible investment alternative.
As a matter of fact, bitcoin has exhibited similar features to gold as a currency through– having limited global supply, maintaining the value and also hedging against global market volatility. Such is the excitement in bitcoin investment that it has outperformed the precious metal, generating an annual return of 155% in comparison to gold’s annual loss of 6% during the same period.
Although Bitcoin seems a profitable investment tool, it can also be as volatile as the value of gold that is depending on perceived risk of owning the said bitcoin as a commodity. Bitcoin’s encryption is done for security purposes. However, the coding identifies the currency itself and does not identify its owner. If a hacker can hack the mining system and gets a secret bitcoin code, they eventually become the rightful owner of the said Bitcoin.
With the rise of Bitcoin, the question arises whether a Bitcoin ETF is an assured outcome, noting that cryptocurrency and blockchain technology have not been met with love universally in the world. Its backers love it, but the central bankers, tax authorities and many other government officials do not share the sentiment. However, one can’t forget that the New York Stock Exchange had announced way back in 2015 that it was launching the NYSE Bitcoin Index (NYXBT).
