bitcoin vs gold Archives

6 Reasons to Invest in Cryptocurrency in 2018

Posted on February 8, 2018 | by [email protected]

It’s a new year and a better time than ever to dive into financial planning. If you’re revisiting your IRA investment plan, here are six reasons why you should look into adding cryptocurrency to your portfolio.

Mainstream Adoption

With the launch of Bitcoin Futures across both the CBOE and CME markets, investors are approaching Bitcoin as a more viable investment opportunity, increasing the digital currency’s visibility and credibility at the mainstream level, and winning over some of its biggest skeptics.

Furthermore, regulated exchanges like LedgerX, (and tZero, which is expected to launch in early 2018), are reducing risk, boosting liquidity, and drawing more institutional investors to the cryptocurrency space.

Digital currencies have gained traction in the political realm, as well. Last September, the Cryptocurrency Tax Fairness Act was introduced as a way to create a taxing structure for purchases made with cryptocurrency and would allow customers to make purchases up to $600 without burdensome reporting requirements. “By cutting red tape and eliminating onerous reporting requirements, it will allow cryptocurrencies to further benefit customers and help create good jobs,” Colorado Representative Jared Polis said in support of the Act. Although it was not incorporated into the tax bill, it remains up for discussion and indicates a tremendous level of interest in streamlining processes surrounding digital currency.

Global Prominence

Bitcoin is being used all across the globe and it is more widely distributed today than it has ever before. Nothing has stopped the massive upward trajectory of cryptocurrency, not even China’s crackdown. Although the price briefly dropped following the news of China’s ban, Japan and South Korea picked up the slack and Bitcoin rose to another all-time high quickly thereafter.

All around the world, Bitcoin and cryptocurrencies as a whole are rising in global prominence. Japan currently accepts digital currency in over 260,000 retail stores. In Venezuela, amidst the hyperinflation of the Bolivar, Bitcoin is used to buy food, plane tickets, and pay employees, and is referred to as a lifesaving currency.

All signs point to the fact that digital currencies are not a passing trend and are here to stay. In a recent survey of different cryptocurrency investors around the world, 90 percent said they believed in the future of Bitcoin and are investing with a long-term perspective.

Diversification of Your Portfolio

Diversification is an investment technique to reduce risk by allocating investments among various financial instruments. Bitcoin and cryptocurrency is one of the best ways these days to diversify your IRA or 401k. Bitcoin’s growth potential is greater than that of any traditional asset class. As Bitcoin legitimizes and stabilizes it will pass traditional investments.

With analysts predicting Bitcoin’s price to hit in the tens of thousands in the near future, it is certainly a portfolio diversification opportunity that will add value to your account.

Gold 2.0

Bitcoin and gold have many similarities. Both have a limited supply, involve mining, and are not controlled by the government. Anti Danilevski, CEO of KICKICO, a Russian blockchain platform for initial coin offerings, explained how Bitcoin patterns parallel those of gold in financially problematic times. “During the last year S&P 500 index was decreased, gold increased by 14.4%, whereas Bitcoin increased by 74.9%, during the last five years, S&P 500 increased by 68.8%, gold decreased by 26.5%, whilst Bitcoin grew by an impressive 24.9%,” Danilevski said.

In the volatile political climate we currently live in, investors are flocking to gold and Bitcoin as safe haven assets. And while cryptocurrencies are a younger asset class than gold, they have already demonstrated enormous growth and a continuous upward trajectory.

Blockchain Innovation

The growing influence of the blockchain and its technology is transforming the way people are doing business. It is increasingly transforming peer-to-peer interactions in the digital world, disrupting traditional processes.

The implications of this technology go beyond finance. Although finance was the first industry to embrace encrypted, distributed ledgers, other industries are adopting the technology as well. Recruitment and human resources departments are using blockchain CVs to verify qualifications of applicants, and intellectual property law, which involves tracking transfer of ownership, is also employing the technology.

Much more than a digital currency, Bitcoin can be thought of as the basis for a groundbreaking technology that many consider the greatest innovation since the internet.

Beyond Bitcoin: The Rise of Ethereum and Other Currencies

Bitcoin is not the only digital currency with a massive upward trajectory. In fact, many experts are now wondering if Ethereum, the second-largest cryptocurrency, may surpass Bitcoin.

There is a community of enterprises, academics, and Ethereum subject matters who comprise the Enterprise Ethereum Alliance, an organization dedicated to learning about, and building upon, Ethereum’s capabilities. Ethereum’s technology is built upon smart contracts. A computer protocol dedicated to digitally facilitating, verifying, and enforcing the negotiation or performance of a contract, smart contracts are the building blocks for decentralized applications. By presenting a new way of processing agreement that removes the verification of a middleman, Ethereum is disrupting the way business is run, and all signs show indicate that this won’t be letting up anytime soon.

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Bitcoin’s Future: Cash or Gold?

Posted on September 27, 2017 | by [email protected]

Is Bitcoin destined to be the new currency or will it be a long-term store of value?

In February 2015, it was reported that the number of retailers accepting Bitcoin had reached 100,000. Most importantly, five of the top 500 leading internet sellers accepted Bitcoin as a method of payment. Those numbers were joyous news in the digital currency community; it meant that Bitcoin was growing in adoption and perhaps a future free of fiat currency was possible.

Fast forward to 2017 and the landscape has changed significantly. Bitcoin has seen a 55 percent increase in transaction volume, but the number of leading internet sellers accepting digital currency had dropped down to three. The explanation is likely that Bitcoin users are holding onto their coins due to their skyrocketing value rather than spending coins for daily transactions.

Fewer payment transactions and an increase in “hodling” (a Bitcoin community term for holding onto coins) has many wondering if the future of Bitcoin will be more like precious metals like gold rather than digital currency. The truth lies in both: Bitcoin will increase as both a store of value and as a decentralized payment system. Here’s why Bitcoin will thrive in both areas of value:

Cash: Japan Will Accept Bitcoin as Official Payment in 260,000 Stores

April 1, 2017, Bitcoin officially became a method of payment in Japan. Two major Japanese retailers partnered with Bitcoin exchanges to start accepting the digital currency as payment. That partnership proved to be only the beginning of Bitcoin in Japan. Coincheck, a Japanese exchange, partnered with Recruit Lifestyle which opened up 260,000 food establishments and retail locations nationwide to accepting Bitcoin payments.

Japan’s widespread adoption and acceptance of Bitcoin sets a precedent for other countries. As other governments consider how to approach cryptocurrencies, the success of Bitcoin in a leading country like Japan is likely to be influential. Allowing Bitcoin payments encourages commerce between Japan and other countries.

Furthermore, Bitcoin payments are low cost and faster across boarders than traditional payments. One universal currency that does not need to be exchanged and is not subject to exchange rates is inarguably valuable to all parties.

Beyond the borders of Japan, Bitcoin as a cash payment is of value to small business owners in the United States as well. Credit card companies typically charge 2-3% on every transaction. For small business owners in particular, those fees are a significant drain on cash flow. The margin of success for a small business to succeed is razor-thin with 50 percent of businesses failing within the first five years. Needless to say, every dollar counts to the small business owners across the country and exorbitant fees from credit card transactions is a problem (particularly in an increasingly cashless society).

Bitcoin and other cryptocurrencies typically cost between 0-1% for every transaction. Small businesses can send or accept bitcoins as payments with no fees attached. Bitcoin doesn’t require a bank to verify each transaction, which means business owners don’t have to sacrifice revenue to financial institutions.

The number of leading internet sellers accepting digital currency had dropped, but it may be small business owners that lead the charge of adoption. The math of Bitcoin simply makes more sense for small business owners than traditional fiat currency. Having said that, there is a strong rumor that Amazon.com will soon begin accepting Bitcoin. Amazon.com being the giant that it is, acceptance of Bitcoin here could start the dominoes to fall for other major retailers.

Gold: Greater Adoption of Cash Will Make Bitcoin a Better Long-Term Investment

Bitcoin is not a game of either/or: ether Bitcoin is used for payment transactions OR it is a long-term store of value. In fact, Bitcoin growing in adoption opens up more and better business opportunities, increases the demand for Bitcoins – and, by extension, their price. The increase in price makes Bitcoin a better long-term investment for individuals and makes it more feasible for business owners to enable Bitcoin payments at their stores and brings other countless benefits to the participants of the market.

Japan’s mass adoption of Bitcoin as a payment system can be seen as the next step for digital currencies with businesses. Adoption of payment is driving up price, which has lead to many investors looking to take advantage of the long-term growth potential of Bitcoin. It is now legal to rollover traditional fund into a Bitcoin or other cryptocurrency self-direct IRA account. More and more investors are turning to digital assets for retirement.

The truth of the matter is that an increase in adoption of Bitcoin as a payment system will increase its value as a long-term investment. What’s good for one is good for the other.

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Sell Gold on the Account of a Rising Dollar?

Posted on December 26, 2016 | by [email protected]

As it becomes increasingly likely that the US Federal reserve will raise rates as early as December (and yes, you might be reading this after the December meeting, but it still applies), gold is under pressure. The market logic is that, with a rate increase indicating that the US economy is getting stronger, the US dollar, in turn, grows stronger relative to other major currencies.

Since investors perceive the US economy as both stable and strong, they usually have their wealth stored in dollars, hence, the reason why the dollars is a reserve currency. However, once there’s panic around the US economy, which invariably threatens the value of the dollar, investors would understandably start looking for ways to secure their wealth, which would involve storing their wealth in anything other than the US dollar. Here’s where gold comes in to play, since it’s viewed as a preserver of wealth. Continue reading →

Why you should invest in Bitcoin?

Posted on October 15, 2016 | by [email protected]

Disruptive technologies have the potentiality to transform existing traditional set ups in a more efficient way. Bitcoin and other digital currencies are primarily for acting as a medium of exchange without the limitations of fiat currencies. But due to their numerous applications and quick adoption, they have become a viable option of investment. Bitcoin has been very successful so far in 2016 with the currency experiencing great adoption and returns. On a parallel scale it has been one of the best performing entities of the year. Let’s look into whether we can actually treat Bitcoin as an asset class and invest profitably:

Good Liquidity:

For any asset class, ample liquidity is an important factor to make profitable investments. Without good liquidity it would be difficult to understand and study market dynamics. After seven years of very organic development Bitcoin ecosystem has consistently gained good volumes. Currently the volumes have started surpassing $1 billion in a day on an average. At this rate, it is almost as liquid as Gold is and far more liquid than heavily invested assets. It is also very secure owing to the infrastructure built around the peer to peer network of the currency. Hence Bitcoin offers good liquidity to investors for heavy investments.

Qualities of the asset:

Qualities of the asset refer to how the asset holds value and how it might change with time. This in totality refers to all the qualities that are related to the asset that might govern its value. In this respect, Bitcoin follows Gold and other precious metals. The major correlation is the fact that the supply is limited. With Bitcoin, we have a definite time frame in mind and it doesn’t have the uncertainty factor like in the case of Gold. This makes it even more valuable and the prices are sure to tend higher. Apart from this, adoption and ease of transfer make it a better store of value than Gold. Hence given the above mentioned factors this makes it a very viable asset class to invest.

Correlation with other asset classes:

To transform into a mainstream asset class that is suitable for investments, Bitcoin’s correlation has to be low w.r.t other asset classes. This would then enable it to be a worthy portfolio diversification component. It is this quality that keeps a diversified portfolio safe from losses.

Bitcoin has little or no correlation with any of the existing asset classes. The maximum correlation, that bitcoin exhibited with each of the other assets is the minimum correlation that any of the other paired assets displayed with each other. This means it would be one of the safest asset classes to invest in as the fundamentals governing this market are totally different.

Is Bitcoin the New Gold: Similarities and Contrasts for Investors Seeking Stability?

Posted on October 7, 2016 | by [email protected]

Investors are always on the lookout for ways to preserve their wealth, increase ROI, and grow their wealth. However, wealth preservation now seems to top the list as the U.S. Presidential elections draw near and the realities of the Brexit vote starts to sink in. Hence, investors tend to seek refuge and stability for their investments in safe-haven assets and alternative investments. Interestingly, gold and Bitcoin are two alternative investments that tend to attract the most attention.

Gold is a naturally occurring element that has been behind civilization, government, war, and trade for thousands of years. Bitcoin is a modern digital cryptocurrency that provides a virtual peer-to-peer platform to facilitate electronic trade. This article seeks to compare and contrast gold and Bitcoin in order to help investors make educated decisions for wealth preservation.

Similarities between gold and Bitcoin

1. Both are gold and Bitcoin are mined

Both gold and Bitcoin are mined by “miners” even though they use different skills and equipment. The changes in the supply of gold of gold are often determined by the discovery of new gold deposits and the development of more efficient mining techniques for extracting gold from ores. Likewise, powerful algorithms determine the volume of Bitcoin in circulation. The said algorithms determine how Bitcoin miners are rewarded when they add new Bitcoin transactions to the blockchain.

2. Finite supply but infinite demand and application

Another similarity between gold and Bitcoin is that they both have a finite supply but a practically infinite demand, use, and application. Gold is mined from the ground and the amount of gold available in the world is finite between 120,000 to 140,000 tons (above ground) at an estimated worth of $1.8 trillion). Likewise, Bitcoin is finite because the total number of Bitcoin that can be mined is 21 million Bitcoin.

However, the demand, usage, and applications of gold and Bitcoin is practically endless. Gold and Bitcoin offer a safe haven in times of financial instability. Gold has some industrial applications and Bitcoin meets the security and transparency needs of a digital economy. More so, some countries have started considering minting physical Bitcoin in order to endorse it as currency.

3. Neither gold nor Bitcoin is tied to a government currency

Another interesting similarity between gold and Bitcoin is that they are both free from direct government influence because neither asset is tied to a government currency. Hence, the government can’t make a move to set their exchange rate, devalue them, or determine how much of either gold or Bitcoin are in circulation.

The fact that neither gold nor Bitcoin is tied to a government currency makes them a good hedge against economic and geopolitical instability. Gold and Bitcoin will always be a legal tender irrespective of country, religion, nationality, or language barriers. Hence, if any world government runs into a mess leading to economic instability, both gold and Bitcoin are unlikely to lose their value; rather, they’ll tend to record an increase in their value during periods of economic instability.

4. Both gold and Bitcoin have a mutual enemy in central banks

Central Banks do not like the fact that gold could render their fiat currencies useless and they always try to undermine the yellow metal at every possible opportunity. The chatter about U.S. Federal Reserve’s plan to raise interest rates in order to reduce the safe-haven appeal of gold is a point in case. Interestingly, these central banks have started transferring their distaste for gold to angst for Bitcoin.

The emergence of Bitcoin as a world currency could potentially erode the necessity of central banks in the global economic landscape. For one, Bitcoin is an electronic money; hence, there’s little need for a national money supply. More so, the low transaction cost associated with Bitcoin transactions will eliminate the need for the interest rates that central banks set in line with economic trends.

Differences between gold and Bitcoin

Despite the interesting similarities between Gold and Bitcoin, it is important to point out some stark contrasts. To start with, gold is physical whereas Bitcoin is purely electronic; hence, Bitcoin is more suitable to the digital economy than gold. The physical nature of gold attracts the attendant risks of theft, being misplaced, and being destroyed (highly unlikely but plausible nonetheless). Bitcoin is digitalized and it would require a serious intent to steal Bitcoin – it could happen but you are not likely to be the only victim.

Secondly, Bitcoin could potentially be a better investment than gold because of the fundamentals of demand and supply and the effect of market forces. The price of gold is subject to many factors such as demand and supply, U.S. interest rates, USD Exchange rates, government policies, and geopolitical tensions. Hence, you can never really know what to expect and gold is an unstable way to seek stability in periods of economic and political uncertainty. Bitcoin has once surpassed gold when it traded for $1,242 and the factors are still much in place to make Bitcoin a more valuable alternative currency than gold.