There is much discussion as to whether gold or cryptocurrency is a safer investment during the coronavirus pandemic. Some of those in the investment community insist cryptocurrency, such as Bitcoin, is the “new gold” as it might be a safe haven of sorts, immune from economic and stock market turmoil.
However, significantly more is known about gold than cryptocurrency, especially in a historical context. Take a close look at gold’s performance throughout history during periods of economic uncertainty and you will find it outperforms the stock market by a large margin. However, this is only one of the many reasons to park your money in gold as opposed to cryptocurrencies.
Crypto is not a Safe Haven
Though Bitcoin’s chart across recent years is quite impressive, there is no evidence to indicate it or any other crypto is a legitimate safe haven during economic recessions. Plenty of money is likely to be poured into cryptocurrencies as the pandemic plays out yet there is no guarantee those who own the bulk of cryptocurrency will maintain their position. It is quite possible the economic uncertainty will prompt the top crypto-backers to pull the metaphorical rug out from beneath other crypto holders and move to cash.
Furthermore, the argument that crypto is a safe haven amidst an economic downswing is nothing but a mere prediction based on prognostication as opposed to actual evidence. No one will know for sure whether crypto is a legitimate safe haven to park hard-earned money during periods of uncertainty until its performance across several recessions is analyzed in-depth.
Gold is a Safer Investment
History shows when the economy and political scene become uncertain, gold and other precious metals rise in value. The stock market will likely prove quite volatile in the months moving ahead, all the way up until the November election or possibly even through the first couple financial quarters of 2021.
Instead of parking your money in an unproven cryptocurrency, the more prudent move is to invest in gold. Gold is relatively stable as it has inherent, serves practical purposes and is tangible. Alternatively, cryptocurrencies do not have inherent value. Furthermore, crypto is digital as opposed to tangible, making it that much less appealing to value investors.
Ride Gold to new Heights
The moral of this story is past performance is the best indicator of future performance. Gold has a proven track record of ascending during economic troughs. Alternatively, cryptocurrencies are unproven in nearly every regard. No one is quite sure how Bitcoin and other cryptocurrencies will hold up amidst a lengthy recession or nasty stock market selloff. Even if investors flee gold, it is likely to bounce back in due time as it has actual value in terms of practicality.
If crypto holders sell en masse, those left holding crypto will find it serves no purpose and will likely take that much longer to bounce back to its prior trading range. Furthermore, there is always a chance federal governments across the globe will put the kibosh on cryptocurrencies, declaring them to be an illegal form of currency. There is no such risk with gold as it is revered as a valuable precious metal across all locations.