Bitcoin is also making waves along with gold. Both assets have benefited globally due to the decline in confidence in US policies and the dollar. However, when it comes to investments, gold and Bitcoin are not assets that can be tied to the same thread. While gold is a suitable asset for portfolio diversification, Bitcoin cannot be seen in the same way.
Gold has stability in crises and support from central banks. Bitcoin is based on speculation and high volatility. The validity of Bitcoin as an investment asset is still a matter of debate. Up to 10-15 percent of the portfolio can be included in gold. At the same time, it is better to avoid investing in cryptocurrencies.
Gold
Gold has historically been important as an investment asset. Therefore, gold has become an indispensable asset in a portfolio. History has shown that gold can generate profits when economies are in crisis. This is why central banks hold gold as a precaution.
- You can ensure a portfolio allocation of up to 15 percent in gold. This will help you achieve risk-adjusted returns over the long term.
- Gold seems to provide consistent gains when the stock market is down.
- Although there is no industrial demand, central banks and jewelry buyers are maintaining demand for gold.
Bitcoin
Whether Bitcoin is an investment asset is still a matter of debate.
- It has no legal validity in any country except El Salvador.
- The value of a currency is based on the ‘collective trust’ of investors.
- Cryptocurrency, especially Bitcoin, is highly volatile, so the risk of loss is greater than the risk of gain.
General trend
Common global reasons can be found behind the recent rise in gold and Bitcoin. The main reason is the decline in trust in American policies and the US dollar.
But their existence and structure are different. The asset gold has historical value. Therefore, it can be said that gold is an asset that has survived time. Central banks around the world are withdrawing their investments in the US Treasury and buying up large amounts of gold. This is providing a strong foundation for the value of gold.
But Bitcoin has less historical relevance. It is based on private invention and investor enthusiasm.
Most wealth managers in India still do not consider Bitcoin as a legitimate investment asset, but in the US, large fund houses like BackRock have launched Bitcoin ETFs.
When considering investment opportunities, one can ensure allocation in gold. It will be useful for asset diversification. Investment in crypto currency can be avoided. It would be appropriate for individuals to make a decision in this regard considering their risk-taking capacity and long-term potential for profit.
