Precious Metals Vs. Bitcoin
Easily the most noticeable difference between Precious Metals and Bitcoin is the simple fact that Precious Metals are tangible and Bitcoin is not. That may seem like the greatest of the differences between Precious Metals and Bitcoin, but they actually are far more philosophically different than that. Precious Metals, especially Gold, have been used by humankind as a medium of exchange for millennia—literally since their discovery. Precious metals also have uses beyond currency. For example, Gold has many applications in medicine while the automotive industry is the largest consumer of Platinum and Palladium. Further, Precious Metals have been appreciated for their nobility and beauty in the form of personal adornments, weapons and armor and art. Physical Precious Metals are generally thought of as a good long-term investment to hedge against market volatility.
Bitcoin, in contrast, is a digital-only crowdsourced currency that was first used in 2009. It is a cryptocurrency in its infancy. While it may have certain ideal applications, it is still so new as to be volatile, and experts believe Bitcoin may be experiencing a bubble.
Investing: Cryptocurrency or Precious Metals?
This is complicated. If you, theoretically, had invested $100 in Bitcoin this time last year, right now, in the fall of 2017, you would have nearly $900 dollars. There absolutely was money to be made, and there could possibly be similar opportunities again. However, the sheer volatility of Bitcoin is not for the faint of heart. While most people look to Precious Metals specifically for a long-term investment with excellent lifetime growth potential, or even as inheritable wealth for their family, Bitcoin’s value can easily fluctuate $200 over a single day. It moves erratically and continually. Financial experts have concerns that Bitcoin’s sudden rise has justifiably drawn comparisons to other investments that shot sky high only to bottom out dramatically—as tech stocks did in the late 1990s and the housing market did in the early 2000s.
An extremely important point in this discussion is the opinion of one of Bitcoin’s developers, Michael Hearn. He states, “Bitcoin is not intended to be an investment and has always been advertised pretty accurately: as an experimental currency which you shouldn’t buy more of than you can afford to lose.” This is not an investment built for returns, and it hasn’t existed long enough to have an accurate picture of how it might behave over a long-haul investment.
Precious Metals certainly see fluctuations. Political climate and economic pressures, especially, influence the small spikes and slumps of the Gold market, for example. However, those fluctuations are nowhere near as extreme as those of Bitcoin, and we have a long history of the trading of Precious Metals to help us understand how the market will respond. People have traded Gold, specifically, since about 600 B.C. and its popularity and desirability has never waned. Precious Metals continue to be enthusiastically traded in all forms by both dealers and investors today. Precious Metals also have practical applications that build their intrinsic value. One cannot build a catalytic converter or make a wedding ring out of digital ether.
None of this is to say that Bitcoin doesn’t have its own practical uses, but we generally feel it is too soon to rely on Bitcoin as an investment-grade purchase.