Why gold is a better alternative investment than cryptocurrency

The Federal Reserve recently announced another rate hike of 0.75%, which predictably sent the stock market crashing. Higher borrowing costs eat away at corporate profits, hurting stock prices and driving investors into the alternative investment market. Lately, gold and cryptocurrencies were two strong alternative assets. So the question arises, what is better?

Why are alternative investments popular in market downturns?

Alternative investments have always been popular with a large segment of the investment community. Much of this has to do with the fact that many alternative investments have shown that they can perform and generate wealth regardless of how the stock markets perform. It stands to reason that when the stock market is going down or experiencing a market correction, an even larger portion of the investment community will turn to alternative investments.

Gold vs Cryptocurrency

For many investors, the battle between gold and cryptocurrency is a matter of perspective. Gold has been an established alternative investment champion for decades, due to its consistent ability to deliver returns when the stock market plummets or inflation eats away at the value of fiat currencies. Cryptocurrencies, on the other hand, are the new kid on the block.

Led by Bitcoin, crypto burst onto the market just over a decade ago and took off like a rocket. Cryptocurrency investors hailed it as the wave of the future, and it looked like they were right when Bitcoin hit an all-time high of $65,000 in September 2021. Unfortunately, the last 12 months have been disastrous. Many cryptocurrencies, including Bitcoin, have been in free fall for most of 2022.

Numerous crypto exchanges have collapsed and bitcoin is being traded $18,838.00. That means it’s down about 60% since September 2021, which is classed as an absolute annihilation. When bitcoin peaked in 2021, professional athletes like Odell Beckham Jr. took their entire salary in bitcoin. The net effect of this was that about two-thirds of his estimated $750,000 in pre-tax income went down the chimney.

After taxes were deducted from his salary, Beckham’s cryptocurrency bet netted him about $35,000. All in all, that’s a loss of $720,000.

The dollar’s resurgence has pushed gold prices down from around $1,900 an ounce in September 2021 to around $1,670 an ounce today. But even by that metric, Beckham would have returned about 10% of its pretax profit, as opposed to nearly 70%.

The other difference is that if Beckham had bought gold instead of Bitcoin, he would still have a physical asset that has proven its worth to investors for centuries. There is no guarantee that cryptocurrency will even be around 10 years from now, let alone 100. In contrast, an ounce of gold being sold $371.83 increased in value by over 500% 100 years ago.

More importantly, gold is a finite commodity, it will likely become exponentially more valuable when there’s nothing left to mine. These facts show that gold is a safer, if decidedly less sexy, bet than cryptocurrency. Beckham may wish he’d invested his $750,000 in a gold IRA or bullion Red skirt for sured instead of Bitcoin.

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