The similarities between cryptos and gold arise from perceptions of their limited supply together with their role as alternatives to fiat currencies. The World Gold Council (WGC) stated that gold stands apart from cryptos, despite both of them possessing various notable similarities.
Interestingly, the role of gold in a portfolio is wholly different from that of the cryptos. Lately, cryptos like Bitcoin (BTC) have gained major popularity among investors which has led to an unexpected surge in its prices, compared to the other asset classes.
Based on the gold trade body, many qualities differentiate gold from the other cryptos. First of all, it is a tangible asset, used as an investment and a consumer good. It is currently highly liquid but less volatile. Many analysts and experts agree that gold is a proven long-term strategic investment that has enough power to mitigate the risks that cryptocurrencies bring to an investor’s portfolio.
Similarities between cryptos and gold arise from the perception of their limited supply and their growing role as alternatives to fiat currencies. The World Gold Council says that cryptos may not be considered as a substitute for gold. They mostly differ in performance and market dynamics.
Notably, the sources of demand for gold are quite diverse. It is purchased and owned by individual and institutional investors and central banks. On the other hand, the ownership and supply of cryptos are highly concentrated. No central bank has come out publicly to declare that it owns cryptocurrencies.
Even though cryptos have delivered portfolio returns due to their massive rallies especially bitcoin, they offer risks of volatility. The ever-evolving regulatory infrastructure might alter the value of the proposition of cryptos. Hence, gold, for now, remains the only dependable haven asset until the crypto market matures to ensure that volatility reduces considerably.
