Today we discuss the similarities and differences between Bitcoin and Gold! Should you invest? Which one is best to invest in? What constitutes a safe haven asset? Is Bitcoin there yet? I answer all of these today.
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Bitcoin allows transactions to happen on a network without the need for a financial intermediary like a bank.
With Bitcoin, there is no intermediary. Every Bitcoin transaction is checked and validated by the entire bitcoin network. So when you send $100 to Jeff, that’s going to be of public record and validated by everyone else on the network.
Since theres no single point of failure, the system is impossible to shut down, manipulate, or control – which is the benefit of Bitcoin.
Bitcoin is then therefore, really transparent and safe – which is one of the core tenets that we’ll find in a safe haven asset (more on that to come).
We all know what Gold is, but there’s a reason why it’s such a good store of value and a good safe haven asset.
Gold is valuable on its own, it can’t really be manufactured out of thin air, and since there’s a finite amount of it on earth, it means that the asset remains static, and the purchasing power of gold will remain, well, in power.
And this kinda makes sense right? If governments can just print more money, then the total amount of money available is going to be a lot higher, lowering the value of existing dollars.
That means with more money available, you’ll need MORE money to buy an ounce of gold than before. And since there is a limited amount of gold, as more money gets into circulation, the price that you’re willing to pay for that gold is going to be HIGHER.
In addition, gold has basically no correlation with assets like the stock market or currencies, which makes it a good candidate for a safe haven asset because when things are volatile in the market, people are going to want to invest in a stable asset like gold.
What constitutes a safe haven/store of value?
– Needs to be a transparent and have safety
– Needs to be durable – cant be destroyed or decay
– Should be scarce, as in, you cant print more of it
– Should have a liquid market – so that you can easily get your money in and out of it
– Needs to have some sort of useful value to it – for example Gold is also used as jewlery/
– Should be stable in terms of its price/volatility
So, should you buy Bitcoin or Gold as a store of value/safe haven asset, or just in general?
In my first Bitcoin video I said that it is a speculative investment, and that If I were giving myself advice, as a long term investor, I would be comfortable holding between 3-5% of their portfolio in Bitcoin.
I’m still sticking by that view, I would say if you really do believe in the future use of Bitcoin and the value of it as a whole, you can invest a little more into that,
So if we take a step back and look at the asset on a longer time horizon, I still view it as a point of diversification in an overall portfolio and it can be valuable to own to serve the purpose of diversification.
I’ve personally never viewed it as an amazing asset to hold, it’s a great hedge against inflation and a lot of people like owning it for that reason.
The best time to invest in gold is during a market correction or recession or anytime where long-term outlook looks volatile.
In general, gold is seen as a diversifying investment.
So here’s my take: take all the information in this video, do your own research and if you’d like to add a position to either BTC or Gold into your portfolio, know that each one comes with its pros and cons.
And the best case in my opinion is that you’re adding these as a way to diverisfy your existing portfolio.
▶️ My name is Humphrey Yang, I’ve built multiple businesses and am passionate about Personal Finance. If you’re trying to build a solid foundation of financial literacy, learn to invest, or become financially free – then I’m here for you! This channel cover topics like getting out of debt, managing money, building credit, multiple income sources, passive income, etc.
Disclaimer: I am not a financial advisor, any investment commentary are my opinions only. Some of the products and services that appear on this channel are from companies that I have an affiliate relationship with, such as Robinhood, for which I recieve a small percentage made via those links, but it doesn’t cost you anything extra!