There are many highly individual factors to consider when investment planning and wealth management. One key question is what types of assets to hold to bring in stability and returns to your portfolio, ideally even in face of a major disaster of an unforseen scope.
For some, the answer is crypto; but for the legacy investor, it will probably be precious metals. So, which is the better investment?
The truth is that there is no easy answer. Both crypto and precious metals have their pros and cons, but how each of them would perform during a dire crisis is pure speculation. They say that history does not repeat itself in a carbon copy accurate manner, after all.
Here is a brief overview of each asset class, and some key considerations for investors.
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What are crypto vs precious metals?
Crypto is a blockchain-based digital currency that uses cryptography for security. Bitcoin, the first ever cryptocurrency, runs on the oldest blockchain ever, but thousands of other cryptos have been created since.
Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control, even if the institutions try. The use of cryptos as a means of exchange is still a niche quirk.
Precious metals, on the other hand, are physical assets with a much longer history of being used as a medium of exchange and store of value. You can listen to experts and read their review of Provident Metals if you want to know more about precious metals.
Gold and silver have been used as currency for thousands of years. Today, however, precious metals are bought and sold primarily for investment purposes. The key point is that it is understood that in case of a tragic collapse of the financial system, no one would object to taking a gold coin in exchange for goods or services. That gives precious metals a lot of perceived value.
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What are the key differences between crypto and precious metals?
When it comes to crypto, there are a few key things that set it apart from precious metals. For one, crypto is digital, meaning it doesn’t have a physical form. This makes it more susceptible to hacking and theft, but on the other hand far more convenient to store and transport.
Performance-wise, crypto is much more volatile than precious metals, meaning its value can fluctuate greatly in a short period of time.
Precious metals, on the other hand, are physical commodities that have been used as currency for centuries. They’re abundant enough to be used for industrial purposes, but rare enough that they maintain a high value.
Gold and silver are the most often referenced precious metals, but others include platinum, palladium, and rhodium. Precious metals are more durable and stable than crypto, but they’re also more difficult to trade and transport.
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Which asset is more liquid?
Both crypto and precious metals can be bought and sold quite easily, but practically speaking, crypto is more liquid. This is because there is a much better available market for crypto thanks to its digital form. Crypto can be traded on crypto exchanges 24/7.
Physical precious metals, on the other hand, are traded primarily through dealers, and the market is not open 24/7. This can make it more difficult to buy or sell precious metals quickly. Also, because precious metals are physical commodities, they can be more difficult to transport and store.
It’s important to remember that liquidity is important if you need to sell an asset quickly, but it’s not necessarily a good indicator of investment returns.
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Which asset is more volatile?
Crypto is much more volatile than precious metals. This means that its value can fluctuate greatly in a short period of time. Since crypto doesn’t have a long track record, investors often view it as a risky investment.
Precious metals, on the other hand, have been used as currency for centuries, and their value is more stable. Gold, in particular, is often considered a safe haven asset, meaning it holds its value even during times of economic turmoil. Additionally, because precious metals are physical commodities, their supply is limited. This makes them less susceptible to sudden swings in price.
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Which asset is more scarce?
Both precious metals and crypto are scarce. Precious metals are scarce because they are physical commodities that have a limited supply as a natural resource. Gold is a mined precious metal, and there is only a finite amount of it.
Cryptocurrency is not a natural resource, it can be created through digital mining or minting new units. But there are a limited number of Bitcoin that will ever be created (21 million). New brands of other cryptocurrencies can be created as needed, but due to network effect these rarely reach the popularity of the original.
You could compare the launch of new alt coins to the introduction of new kinds of precious metals that were not traded before - these don’t reach the same level of popularity as gold either.
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Which asset is more durable?
Precious metals are more durable than crypto. This is because they are physical commodities that can withstand a lot of wear and tear. Gold, for example, is obviously used in coins and jewelry that last for centuries.
Crypto, on the other hand, is digital and doesn’t have a physical form. Under current global infrastructure, this makes it more susceptible to power cuts and also to digital rot. It’s easier to store and transport, but if a person loses their private key, they will lose access to their crypto.
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Which asset has a longer track record?
Precious metals have a much longer track record than crypto. Gold, in particular, has been used as currency for thousands of years. Cryptocurrency, on the other hand, was created in 2009 with the launch of Bitcoin. While crypto has grown rapidly in recent years, it doesn’t have the same long-term track record as precious metals.
If you’re looking for an asset with a history of holding its value, precious metals are clearly the only choice here, but perhaps consider diversifying your portfolio.
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Which asset is more difficult to trade?
Precious metals are more difficult to trade than crypto. This is because in their physical form, they are not traded on exchanges and there is no 24/7 market for them like there is for digital assets.
Crypto, on the other hand, can be bought and sold on exchanges 24/7. As already mentioned, crypto is much more liquid than precious metals, meaning it can be traded more easily - but only as long as there is demand.
If you’re looking for an asset that you can speculate on quickly and easily, crypto is a better choice. But it’s worth noting that crypto is more volatile than precious metals, so it can be a more risky investment.
Putting it together
Both crypto and precious metals can be good investments, but they each have their own advantages and disadvantages. Precious metals are scarce, durable, and have a longer track record. However, they are also more difficult to trade and not as liquid as crypto under usual circumstances.
Crypto is more volatile and has a shorter track record, but it’s easier to trade and more liquid. At the same time, they are the choice with the higher perceived risk as it is still a speculation whether crypto will be useful as a source of value in a deep financial or other crisis.
Keep in mind that when deciding which asset to invest in, it’s important to consider your investment goals and risk tolerance.