With the global economy headed towards another recession, Bitcoin has taken a hard dive, pulling all the altcoins with it. The question on everyone’s lips is - what’s better hedge, Bitcoin or gold?

What to invest in now: Bitcoin or gold?

Bitcoin was created as “digital gold”. Mysterious Satoshi Nakamoto expanded on the works of previous attempts at creating a cryptographically secure digital currency. One thing that was built at the very core of Bitcoin was the idea of scarcity. It was meant to imitate gold as the ultimate store of value.

Bitcoin was just a toy for techno-enthusiasts all the way up to 2017. That was the year when Bitcoin skyrocketed in value. And it was only in 2021 that the financial institutions joined in. Brokers started recommending the expanded investment portfolios to include crypto. Even at SmartMoneyMatch, you can find investors, asset managers, and financial services that can help you get your exposure to the cryptocurrency of your choice.

From “digital gold” to a stock market indicator

A funny thing happened to Bitcoin in its momentous watershed moment, just when the big companies started placing it on their balance sheets. Namely, once the big corporations and financial institutions started buying Bitcoin, it became less of a store of value, and more a stock market indicator. 

Riding on Bitcoin’s success, other crypto currencies have seemingly tried to swerve away from this and so we ended up with various implementations of blockchain tech, such as creating a web3 website (a website that can be established without registering personal information, as required by traditional websites, and where cryptocurrency transactions can be handled)..

Source: pxhere.com

The usually very volatile crypto markets started following the pulse of Bitcoin. And it was steadily climbing, price varying, but going up. While there is logic in Bitcoin being an indicator for the entire crypto market, there is no sense whatsoever for the price of Bitcoin to reflect movements on the stock market.

When the economy is healthy and interest rates low, the investors love risk. There is a sudden appetite for the highest returning, juiciest, most volatile, speculative assets. I can’t think of anything remotely like it in the markets, save crypto!

You see where this is going. Investors were starting to dip their toes into the world of crypto. However, USA’s Fed had to start intervention. Interest rates went up. The crypto markets turned bearish. Movement in traditional markets wouldn’t otherwise rock the world of crypto, but with big investors selling their crypto assets, the price of Bitcoin tumbled down more than half from its all-time high.

While the serious crypto investors, also known as HODLers (Hold on for dear life), still think that Bitcoin will keep going up, the fall of Bitcoin caused what came to be called “Crypto Winter”.

Recently, Bitcoin revealed its ‘speculative asset’ face once again, dropping further in value. Then another momentous event took place. Crypto markets didn’t follow Bitcoin. 

The plot thickens, so it’s time to see the case of gold…

Meanwhile, gold proves to be, well… golden

Gold is still the true store of value. It mainly refers to the fact that gold’s price is rather stable. If you want an investment with yield, e.g. if you want a return on investment, then go for stock.  

However, for the last three years, the gold market has been very bullish. Prices went from around $1,200 in 2018 to $1,400 in 2019, only to climb to $1,800 in 2020. This trend has continued, to today’s price of around $2,000. Indeed, the gold price forecast for 2022 is about $2,500. Now you see why Bitcoin wanted to be “digital gold”.

Source: flickr.com

Will the bullish trend persist, it’s hard to tell. However, the three key indicators are the price of the Euro, bond yields, and inflation indicators. 

The latest events have turned USD stronger, which always inversely affects EUR, but just like gold, the EUR market is bullish. Bond yields are inversely correlated with gold, and gold definitely shines the brightest in an inflationary environment. And we are officially in the monetary inflation period, which is reflected in the price of gold.

So what’s the verdict? Bitcoin or gold?

Well, to answer this question you must ask yourself what kind of investor are you? If you want to be safe, store the value against inflation, gold is the way to go. Always has been. Even if the dollar goes stronger, and the bond yield rise, we will stay in the inflationary economy for many years, assuring that the price of gold will keep increasing steadily.

On the other hand, Bitcoin has proven to be unreliable in the mid to short term, and only those who firmly believe in it will HODL, making it feasible probably as the very very long term investment. 

Remember that the plot thickened? There are many cryptocurrency alternatives to Bitcoin now (altcoins), and they’re opening up many possibilities for short- to mid-term investors. Of course,  you’ll want to research crypto markets closely to examine each coin’s use cases and match it to your tolerance for investing in new ventures. Once you’ve made a decision, you can transact your investments instantly online with credit and debit cards. As an example, if you were to buy Ripple, you’d learn that it’s built on a network four times faster than Bitcoin’s, which can potentially help it scale much faster, which might be an important consideration for investors.

As regards the world outside of the USA, the trend seems to favor crypto, especially when comparing cryptocurrencies with traditional investment options. The crypto adoption in the USA is rising but more importantly, it’s rising even faster globally. In its own way, it has become a global investment market.

Wrapping up

Many cryptocurrencies broke off the connection with Bitcoin, marking the moment of maturity of the cryptomarkets. So if you are looking for profits amid the crypto winter, let us remind you that while the degenerate “to the moon” skyrocketing coins are no more, there is still plenty of ways to invest in the world of crypto.