Talks of printing money by the Federal Reserve have driven investors to either Gold or Bitcoin as a safer investment vehicle. This has resulted in a raging debate on which is a better investment choice of the two. Both gold and Bitcoin plummeted with the rest of the financial instruments following the global COVID-19 epidemic. But both have bounced back in the last couple of weeks, which could indicate that investors have a lot of confidence in Bitcoin and gold. But the million-dollar question is: should you buy gold or Bitcoin?
Gold has traditionally been viewed as a safe storage of value since it has made significant gains over the years. Gold is not only used for underpinning currencies but it is also a highly sought-after metal for jewellery and other industrial and personal applications. In moments of market volatility and uncertainty, gold has always provided a safe investment vehicle with a guarantee of returns on investment in the long-term. But as much as gold is a safe investment, it is now emerging that it doesn’t necessarily give the best ROI as compared to other emerging alternatives. For instance, Bitcoin has proved to have a better ROI.
However, gold is still loved by investors because it has no correlation with other investments like stocks and currencies. In 1971, President Nixon severed the ties between gold and currencies and since then, gold is no longer used as a base currency. This is why gold is often bought by investors in times of crisis as a way of softening the blow or even profiting from the crisis.
Even though Bitcoin is a digital currency, it has some interesting similarities to gold. For starters, it is not issued by a federal government or a central bank. Additionally, the total supply of Bitcoin is limited to 21 million tokens. These similarities kind of make both good alternative investments in times of crisis. However, there are other qualities of Bitcoin that make it stand tall.
Why Bitcoin Wins
Bitcoin is a digital currency and it has little barrier to entry. Almost anyone can buy Bitcoin and either treat it as a long-term investment or day-trade it to grow their accounts. Unlike trading Gold which requires users to open accounts with brokers who often require huge deposits and sometimes charge exorbitant commissions, Bitcoin can be traded inexpensively on cryptocurrency exchanges. When Bitcoin was just starting out, buying it with fiat currency was a tall order. Today, however, you can easily buy Bitcoin with your credit card, PayPal, and almost any other payment processor of choice.
Another often overlooked benefit of investing in Bitcoin is the tax advantages. Bitcoin investments can save you up to 8% on taxes as opposed to investing in gold. However, this will only apply if you hold your Bitcoin for at least 12 months. The IRS treats Bitcoin as a “property” and this means that the gains you make out of your investment will be subject to the capital gain taxes. Capital gain taxes on property investments are capped at a maximum of 20% irrespective of how much profit you make. Gold, on the other hand, is treated as a “collectible” and is subjected to a capital gain tax of 28%. This means that if one investor buys gold and another buys Bitcoin, the one with Bitcoin will pay 8% less tax on the gains after a year.
Shrewd investors know how to take advantage of tax incentives and loopholes to maximize the returns they make on their portfolios. In fact, this is a good place to start when trying to decide whether to buy gold or Bitcoin. If you consider the amount you will save on commissions payable to brokers and taxes payable to the government, it is a no brainer that investing in Bitcoin is more profitable than investing in Gold. Besides, the last decade has demonstrated that the price of Bitcoin will always go up over time.
Notwithstanding, you can still trade gold without selling your Bitcoin. Just open a crypto collateral trading account and you can leverage your digital assets to trade gold. This way, you will have the best of both worlds. With the halving of BTC looming, it is widely expected that demand for Bitcoin will increase, which will translate into even higher prices. But even if there is a huge damp after the halving, traders should just stay calm because Bitcoin will bounce back, as it always does.