The Bitcoin vs Gold discussion is back in the spotlight. The ongoing Russia-Ukraine war has reignited the narrative that Bitcoin is not just a speculative asset but is also a seizure-resistant, policy-independent, longer-term store of value.
Against the backdrop of conflict, the demand for Crypto is being stoked, but I don’t believe Crypto can be viewed as a safe haven just yet; instead, it’s appeal is derived from it being a supply capped, credit free, digital bearer asset that is proving to be a viable alternative to traditional finance in this current environment.
The debate between Gold and Bitcoin is ongoing. First, however, I like to revisit the significant differences between the two. I recognise that Crypto may share some similarities with Gold, but as an asset, Bitcoin still has a long way to go to become anything compared to real Gold. When I put Gold and cryptocurrency head to head, Gold is still winning.
Most significantly is that Gold has a six-thousand-year track record as a safe store of value. On the other hand, Bitcoin has been in existence since the first block was mined in January 2009.
What about asset classification? Gold coins and collectables are historically proven, are more stable and are categorised as tangible assets. Classifying cryptocurrency has proven a bit more elusive. Market experts make the case that Crypto belongs to its own asset class, pointing to several variables such as the low correlation between cryptocurrency and other asset classes.
Gold coins and collectables are safe-haven assets. Gold occupies the top spot in the ranking of haven assets, including property, diamonds, and fine art. Cryptocurrency is highly speculative, and the market is primarily unregulated, raising doubts about whether digital currency does indeed offer investors safety during times of turmoil. Gold withstands periods of crisis, fluctuation and inflation and is tangible—so genuine physical insurance. Cryptocurrency has become something that investors have turned to in times of distress, but it is an uncorrelated risk asset, which is essential to distinguish it from a safe-haven asset.
One of the most striking differences between gold coins and cryptocurrency is that while the precious metal represents a physical object, cryptocurrency is entirely digital. Gold coins are a physical commodity. They are solid. You can feel the weight of a coin. That’s very reassuring to our clients. On the other hand, cryptocurrency is a digital creation, a convertible virtual currency. That said, the nature of Crypto has not been deterring investors. On the contrary, the Russia-Ukraine war has been a significant accelerant, fuelling demand.
Many cryptocurrencies’ early adopters are now billionaires, among the wealthiest people globally, and others have made massive profits. The Scoin Shop accepts and embraces cryptocurrencies (Bitcoin, Ethereum, USD Coin, Litecoin, etc) as payment for gold coins and collectables. So your clients can cash out their crypto profits and buy Gold – anything from Gold Bullion and Proof Krugerrands, rare ZAR Gold Coins to Modern Numismatic gold collectable coins. The option of using Crypto to buy physical gold coins and collectables – “coins for coins” – is a growing trend, and I expect this to continue, especially now with global uncertainty and the demand for physical Gold on an upward course.
Even crypto enthusiasts recognise the benefit of holding some physical gold. I am a traditional gold bug, but I support a diverse portfolio of different assets such as cash, property, shares, gold coins, and collectables. Our philosophy is that buyers should feel comfortable allocating a share of their funds towards Gold. Not as a knee-jerk reaction but an ongoing commitment to diversification that can help reduce the impact of market volatility and inflationary risk. We have seen speculators come and go, but the real winners are the collectors who put away a little bit into Gold whenever they can, whatever the price.
Some of our largest clients with over R20-million in gold holdings started out with a single ¼ oz Krugerrand. These buyers have been at it for years. Geopolitical uncertainty and inflationary concerns are shining the spotlight on Gold resulting in a bump in interest in owning gold coins and bullion as a portfolio diversification tool. As a consequence, we have seen a massive spike in interest in Gold in the past two months.
Buyers can benefit significantly from thorough due diligence before purchasing or speculating on either Gold coins or Cryptocurrencies. Plus, they should keep in mind that risk is inherent to investment, so they shouldn’t invest any money they cannot afford to lose.
Speak to me to learn more about SAGCE & The Scoin Shop, our products and services. Then, let’s work together to make sense of this insecure moment in history and debate ideas to preserve wealth.