Gold is traditionally considered to be a safe asset where the funds move during the problems in stock and exchange markets. This is shown by the example of January 2016, when Shanghai Composite index collapse caused the other stock indices collapse. Investors reacted immediately to the drop and shifted their funds to gold, within 2 months gold price rose from 1090 to 1260 US dollars. The same situation was on the eve of the referendum in Great Britain; the quotes grew from 1210 to 1350 US dollars during June. 2016 was rich in fundamental factors. So, as soon as the last event of the year, the elections in the USA, happened, the quotes by the end of the year had decreased almost to the level of January 2016.
5 arguments for investing in gold:
- trust in gold. Gold in investors minds is undoubtedly considered to be a safe financial instrument. This image was formed in prior centuries when gold was a safe currency equivalent and means of its providing. Gold will be taken as a safe asset for a long time;
- natural scarcity of the resource. Gold reserve is limited, constant industrial demand for the metal will maintain the price;
- freedom to own. Material can be inherited or presented to another person;
- liquidity. Gold in any form can be quickly converted into any currency;
- diversification of risks. In 2008-2010, when there was stagnation in exchange, stock and commodity markets, gold increased by more than 80%.
Cryptocurrency is new digital gold
Cryptocurrency quotes behave in the same way; on the eve of the referendum in Great Britain bitcoin the price grew by more than 50%. After spring quotes growth analytics started to speak seriously about the fact that cryptocurrencies can become for investors a “safe-heaven”, which is now precious metals. Optimistic investors believe that blockchain is the future and the cryptocurrency market is a new investment trend, which will replace the exchange and commodity markets. On April, 1st Japan officially recognized bitcoin as a fiduciary currency and that was the starting point of the new investment instrument.
9 arguments for investing in cryptocurrency:
- yields dynamics. For the last 6 months BTC has grown by more than 50%, ETH dynamics is similar. Despite the strong volatility (5-10 % a day), in middle and long-term prospect, the dynamics is upward. Gold has been in the range of 800-1400 US dollars for the last 10 years (except for its extreme growth during the mortgage crisis in the USA);
- corporations support. In late February 2017 Ethereum Enterprise Alliance was created, which included more than 150 corporations, CME Group, Mastercard, Intel, Microsoft, J.P.Morgan are among them. This indicates that corporations consider cryptocurrency to be promising and are willing to support it. It will inevitably influence its quotes growth;
- limited issue. Scarcity of the resource with the rising demand cause the quotes growth. Cryptocurrencies issue is limited, cryptocurrency doesn’t have the single issuing center. Gold production long ago got out of control and hasn’t not been providing the currency for a long time;
- simple investment. Gold buying is related with some difficulties; certification order, providing the conditions for material metal storage, etc. You can make profits from cryptocurrency by a few easy clicks;
- anonymity. All the cryptocurrency transactions are anonymous, while futures or material gold trading is controlled by tax authorities;
- safety and transparency of investment. Corporations are adopting the transparency of blockchain technology, creating on its basis applications with their own cryptocurrencies. Gold can be faked, cryptocurrency can’t;
- transition to the age of digital technologies. Bretton Woods and Jamaican system turned gold from a cash asset into an investment one. Today, when the world is entering the age of digital technologies, that is the cryptocurrency that becomes the center of investors attention;
- availability. Investments in gold are available to investors with relatively large amount of seed capital, gold can be bought only in special stock exchange or in banks. Everyone who has access to the Internet can invest in cryptocurrency;
- area of use. Gold ceased to be a currency and is used only as an investment asset. Cryptocurrency, except for being an investment asset, is also a currency and can be invested into ETF.
I suppose, these arguments are sufficient to make sure in cryptocurrencies’ promising outlook. Gold is gradually losing its significance, attracting only conservative investors who are used to “holding in the hands” their asset. As 20-25 years ago the Internet entered the world, changing the life and the minds of millions of people, as now a new age is starting, the blockchain age.
You can invest in cryptocurrencies in the following way:
to create a farm and start mining or start cloud mining, this option is rather expensive and long to yield;
to trade in exchange markets. The drawback of this way is the unsafety of wallets; the wallets of exchange markets and private services can be hacked, the wallet on Winchester is difficult to restore in case it is out of order;
to trade cryptocurrencies in Forex. For example, in July LiteFinance added to the instruments BTC/EUR, BTC/USD pairs, ETH is next.
Cryptocurrencies’ popularity activates fraudsters. Today there are more than 1000 cryptocurrencies (according to Coin Market Cap data) and a some of them are hypes, which are renewed almost every month. So, in conclusion, there are a few tips how to invest in cryptocurrencies correctly:
- cryptocurrency is a money unit inside an application, based on blockchain technology. Analyze the application feature, how useful and promising it is;
- a lot of decentralized applications will be developed inside Ethereum, so ETH price in the long term will only grow. Invest in cryptocurrencies which have already proved their work
- a project offering a fixed income a week (month) is a hype;
- don’t hurry to take part in ICO. There are examples, when token price falls after their first placement.
Conclusion. Gold is gradually losing its priority as an attractive investment asset. Blockchain technology is changing the world, creating a new economy and starts a new age of investing. Cryptocurrencies are the future, and people who will believe in innovations and internet technologies today, already tomorrow can multiply their investments.
P.S. Did you like my article? Share it in social networks: it will be the best "thank you" :)
Useful links:
- I recommend trying to trade with a reliable broker here. The system allows you to trade by yourself or copy successful traders from all across the globe.
- Use my promo code BLOG to get a 50% deposit bonus on the LiteFinance platform. Simply enter this code in the appropriate field when funding your trading account.
- Telegram chat for traders: https://t.me/litefinancebrokerchat. We are sharing the signals and trading experience.
- Telegram channel with high-quality analytics, Forex reviews, training articles, and other useful things for traders https://t.me/litefinance
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance broker. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2014/65/EU.
According to copyright law, this article is considered intellectual property, which includes a prohibition on copying and distributing it without consent.
