For ages, Gold has served many purposes. It appears good and vibrant and is viewed as auspicious. Not just for wearing as jewellery or storing as an asset, gold is also employed in particular religious rituals. Be it a child’s birth or someone’s marriage, no celebratory occasion is viewed as total without the need of a present of gold. It can not be denied that Gold holds a particular location in each Indian’s life.
But, when it comes to its relevance as an investment selection, have you ever wondered – is every thing golden about the Gold?
One of the arguments in favour of acquiring gold for investment that you could have heard is that it will save you in complicated occasions. And this has been such a potent argument for ages that, according to an estimate by the World Gold Council (WGC), Indians households could have accumulated up to 25,000 tonnes of yellow metal. This is about 12.65% of the total 1,97,576 tonnes of Gold mined all through history!
However, if we maintain the religious and auspicious elements of Gold aside, a new challenger to it as an asset class has emerged swiftly in the last 10 years in the kind of Bitcoin, which is becoming seen as a new Gold, or the digital gold of 21st century. This short article examines regardless of whether this cryptocurrency could be the new gold that you ought to acquire in this festival season to fund your future.
Gold and Bitcoin – equivalent or various?
Prof Purushottam Anand, Assistant Professor, IFIM Law School, says each Gold and Bitcoin are various in character and utility.
“Gold is an asset that has been recognised and accepted both as a ‘store of value’ and a medium of exchange for centuries. Cryptocurrencies belong to a new asset type and have not even completed a decade of existence. Though some of the leading cryptocurrencies like Bitcoin have been compared to gold by many crypto enthusiasts, cryptocurrencies widely differ in their character, utility and technology involved and it is not prudent to paint them with a single brush,” says Prof. Anand.
However, according to other specialists, Bitcoin requires a lot of inspiration from Gold and even improves upon the yellow metal in lots of techniques. But scepticism and lack of clarity from the Government is stopping a number of Indians from investing in Bitcoin.
Bitinning founder Kashif Raza believes that Gold deserves all the credit it has received till now as an asset class. But Bitcoin is the future.
Raza says becoming exceptional, valuable and uncommon, or scarce, are the 3 major specialities that have made Gold a universally acceptable retailer of worth for ages. Bitcoin, although it is new, possesses all these specialties and improves upon Gold in lots of elements.
“The advent of Gold provided a level playing field for transactions across the world. Gold deserves all the credit it has received till now. Buiding its reputation in thousands of years, Gold has always retained its value and the world believed in it, giving authenticity to the cultural narrative that one should accumulate gold on every possible occasion,” Raza says.
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However, for the new generation, which does its transactions practically and is not also considerably attached to the notion of tangibility, the advent of Bitcoin has offered them access to a digital asset that can be exponentially more rewarding than Gold in the lengthy run, he adds.
There are a number of powerful arguments in favour of Gold, generating it the go-to asset in the course of festivals. But Bitcoin is swiftly difficult all these arguments. Take a look:
First, uncommon and restricted provide.
Raza says Gold is exceptional mainly because its provide does not improve as per demand. But in the case of Bitcoin, rising the provide is not possible.
“We have been hearing for years that supply of Gold will end one day. But the reality is that its supply has gradually increased, though not as much as the demand. There are still many unexplored sources of Gold and we are not sure of how much gold is still there to be explored. But when it comes to Bitcoin, the last of it will certainly be mined by 2141. As many as 18.8 million bitcoins have already been mined and only 2.2 million are left,” he says.
Manoj Dalmia, Founder and Director, Proficient Equities Private Limited, also says that Bitcoin is uncommon. It can not be developed at will as there are only 21 million of them, and no one can build more. That signifies that no government can manage it or fake it.
When it comes to Gold, no one is going to build more gold which will be feasible. However, the scarcity of gold alterations based on how considerably you place into locating it, says Dalmia.
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Founder of cryptocurrency exchange WazirX, Nischal Shetty, says, “Bitcoin has been given the name of digital gold due to the limited supply of coins available. HODLERs believe that these traits – combined with global availability and high liquidity – make it ideal for storing wealth for longer durations, believing the value will escalate over time.”
Shetty suggests we need to have to distinguish the similarities amongst Bitcoin and Gold.
Second, tangibility and flexibility
Seeing is believing. This is one significant argument that puts Gold ahead of cryptocurrencies in the eyes of lots of. Gold is tangible. You can hold it in hand and retailer it at home or in a bank locker.
In contrast, every thing about bitcoin is virtual. So, how can one think in one thing virtual? Something that has no physical look and can not be experienced…the argument goes on.
But Raza differs. He says occasions have changed. The way we deal with income now is not the very same as it was, just till a handful of years ago.
“We now have a UPI generation, which doesn’t like to carry cash. It is comfortable in online and mobile transactions. For such a generation, tangibility argument doesn’t make much sense,” he says.
“Secondly, gold is not a flexible asset. In times of crisis, you can’t carry it everywhere, nor can you sell it in very small fractions. But when it comes to Bitcoin, you can sell it in very very small fractions, that too in a few seconds on your mobile phone,” he added.
As lots of as one hundred million satoshis make one bitcoin, exactly where one satoshi is equal to Rs .0355223 (as per the existing price).
Returns
Gold has offered about 158 % returns considering that 2010. The value of 10 grams of 24-carat gold in 2010 was about Rs 18,500. Today, the value of the very same quantity of gold is Rs 47,810.
If compared to Bitcoin, Raza says Gold has grossly underperformed. As the cryptocurrency has offered an annual return of about 230% in the last 10 years!
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Sharat Chandra, Blockchain and Emerging Tech Evangelist, agrees, saying, “Bitcoin has become the numero uno asset, dislodging gold from its pedestal. It is the best performing asset class of the decade thanks to an annualized return of 230%. Bitcoin has emerged as a challenger to the yellow metal and is therefore rightly hailed as the ‘Digital Gold’ by bitcoin maximalists and crypto enthusiasts all over the world.”
Volatility
It is not that only Bitcoin is volatile. Experts argue that even Gold has had its volatile days.
“One could argue about the volatility associated with bitcoin prices but let’s not forget that even gold had its share of volatile periods before it matured as an institutional asset. Crypto, as an asset class, is fairly young and the volatility would be reduced significantly as the cryptocurrency market grows and more institutional players start moving in,” says Chandra.
Purity
One can fake a piece of Gold and it requirements to be tested for purity. But no one requirements to test Bitcoin for purity.
“Bitcoin and gold can’t be counterfeited and duplicated. Bitcoin is easy to recognize and impossible to counterfeit. Gold is pretty recognizable, though it must be tested for purity under some circumstances,” says Dalmia.
Hedge against inflation
According to Chandra, Crypto can enable in hedging portfolio dangers and hence in some techniques superior than gold in terms of paring down dangers of inflation. “Gen Z and millennials aren’t too fond of physical or paper gold. Given the returns cryptos have offered, they might allocate more capital towards crypto,” he says.
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Dalmia says investors view bitcoin as digital gold and a hedge against inflation, expecting it to appreciate more than time more than-performing the existing inflation price. “The same stands for Gold but it has not performed well in the past few years.”
Should you invest in Bitcoin?
Now, the large query everybody is asking these days: If Bitcoin is so fantastic, ought to I invest in it?
Investing in Gold has generally been related with a sense of safety. That you can sell your gold at any point of time at a greater value. But when it comes to cryptocurrency, Prof. Anand believes that Bitcoin or other cryptos could not serve this objective in close to future in India.
“Investment in Gold offers a sense of security due to stability in price movement. In the case of cryptocurrencies, price volatility is much higher and it is difficult to estimate the movement of price especially from a short term perspective. Though investors have been able to sell their cryptocurrencies at a higher price from the long term standpoint, sometimes, they may have to wait for the market to recover from any short-term crash to be able to book any profit. Thus, as of now, crypto seems unlikely to serve this purpose in the future,” he says.
“Gold enjoys a special privilege in our society because it is also used as jewellery and has been associated with a festive celebration in historical and cultural context. Investors also prefer to buy gold during festivals because of its tangible form and aesthetic value. It may be right to claim that crypto could be a ‘better investment for more returns’, but gold still seems to be a ‘safer investment’,” Prof. Anand adds.
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However, a number of specialists think that the value of Bitcoin would continue to improve in the lengthy run.
Raza says one ought to look at Bitcoin as a lengthy-term investment selection.
“Even when we buy gold, we hold it for several years. Many families would resort to selling gold as the last option and only during a crisis. One can generate wealth from Bitcoin also if he/she invests in it like gold and for a long duration.”
For lots of specialists, Bitcoin is currently the digital Gold of the 21st century. But they underline the need to have for more awareness and caution.
As Kumar Gaurav, Founder & CEO of Cashaa, says, “Bitcoin has already been digital gold for me for the past few years. However, People still have to understand the fundamental of Crypto to do a head to head comparison and should look more than price speculation,”
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Gaurav Dahake, Founder & CEO, Bitbns, says crypto gifting is now catching pace in particular amongst millennials and GenZ’s. “While gold has given an average return of 12-14% in the last 10 years, Bitcoin, with an annualized return of 230% over the same period, has outmarched all other traditional assets by a big margin and presents itself as a very attractive investment avenue in the long run,” he says.
How considerably ought to you invest?
A lot of regulatory clarity on Bitcoin and other cryptocurrencies are but to come. Hence it is significant not to let greed or the lure of extremely higher returns drive your investment choices.
In individual finance, specialists recommend possessing a balanced investment portfolio. Balancing is significant even whilst investing in crypto.
Though there is no distinct limit that can be prescribed for investing in Bitcoin. It would be prudent not to place all your savings, or emergency fund in Bitcoin, specialists say.
“Crypto investment should not exceed more than 5 percent of your portfolio. Follow the basics of investing and do your own research before investing in cryptocurrencies,” suggests Chandra.
Prof. Anand says, Gold and Cryptos have various roles to play and an investor will have to strategically diversify the investment portfolio thinking of his/her threat appetite. It is also advisable to seek help from economic advisors just before generating such choices.
(Disclaimer: The ideas/suggestions about cryptocurrencies in this story are by the respective commentator. The Spuzz Online does not bear any duty for their suggestions. Please seek advice from your economic advisor just before dealing/investing in cryptocurrencies.)