Gold and cryptocurrencies are both alternative investments to which investors may choose to allocate a portion of their portfolio.

Can We Compare Bitcoin to Gold?

Digital gold refers to a securitized gold investment that is tradeable and liquid, such as a gold derivative or a unit of exchange that is pegged to the gold price.

More broadly, it refers to a store of value outside of the fiat currency system.

For the last few centuries, gold has held a privileged position among precious metals as the de facto store of wealth for governments and private households alike.

Its status-symbol status and many industrial uses have created a diverse range of market participants who continue to demand gold.

Industry commentators wonder if cryptocurrencies and Bitcoin more specifically could be coming for gold’s crown.

The base of investors who are interested in gold and Bitcoin has plenty of common ground.

This includes monetary policy hawks and investors who believe that the government (or central bank) will not act to preserve the value of currencies.

Why Bitcoin Could Become the Gold of our Time

Widely regarded as a store of value., some research shows that up to 25% of South Africans hold a cryptocurrency in some form.

This is widespread adoption.

Bitcoin has shown impressive price growth.

Those who bought Bitcoin early in 2021 using MT4 for mac may have experienced gains of up to 60% at the time of writing.

These gains could be short-lived, but the euphoria in crypto communities is reminiscent of the ‘gold bugs’ of the early 2000s, who bought into gold during the surge in inflation across the world.

So far in its history, out of the bulls and the bears, the clear winners have been those who have bought Bitcoin at pretty much any phase in its growth.

Why Bitcoin May Not Become Par With Gold

Cryptocurrency is untested over long periods.

The value of gold has stood the test of time, which makes it a respectable asset for long-term institutions such as insurers and central banks to hold.

In contrast, most cryptocurrencies traded on exchanges today are less than five years old.

Gold has shown counter-cyclical tendencies, but cryptocurrencies have become correlated with equity markets and meme stocks in particular.

Therefore, is it as useful in a portfolio?

Critics argue that Bitcoin is a speculative bubble that could pop in the next few years, resulting in serious losses for investors and traders.

Financial regulators in South Africa have warned that investors only invest what they can afford to lose.

Trading Bitcoin with CFDs

CFDs use leverage, which combined with a highly volatile underlying asset such as cryptocurrencies, can lead to larger gains or losses relative to investing with wholly-owned assets.

Therefore, CFDs are advantageous and risky products. They do however allow for lightning-fast trading with full control over the precise amount of leverage to be used in each trade. 

When you trade with a CFD, you become a counterparty to an agreement between yourself and the principal CFD broker.

This allows you to mitigate some other crypto risks including the risk of crypto exchanges being hacked.

Beyond CFDs, there are many ways to hold Bitcoin for the long term, including:

• direct holdings of the currency
• buying via a broker, or
• even investing in Bitcoin ETFs which are being brought to the financial markets in 2022.