Bitcoin vs Gold..And the winner is?

In the past 6-8 months, if one hasn’t heard of the terms ‘cryptocurrencies’ or ‘ blockchain technology’, one has lived or existed in a completely different world altogether. Cryptocurrencies in very simple terms are digital currencies which enable you to have faster digital transactions without too much of government interface.

Such an asset class has emerged due to the sheer inability of governments worldwide to have their local currencies fully convertible. However, the craze for one of the crypto currencies namely Bitcoin which has registered yearly gains of almost 2000% has fuelled the imagination of the youth all across the globe. Even though it looks almost impossible for any asset class to continually register this kind of returns on an annual basis which is one of the reasons to not buy in the immediate term, crypto currencies have had more naysayers than admirers for several reasons especially when compared to the king of precious metals .i.e.Gold:

  1. Utility- How can we use a Bitcoin, Monero or an IOT coin in our regular lives? Whereas gold can be utilized for jewellery, electronics, decoration & more importantly as an important investment asset, famously as an hedge against equity markets
  2. Intrinsic value- Gold can be felt, touched, used & thus can be sold to realize monetary value. Bitcoin being a digital currency currently has no physical attribute and yet strangely several countries have introduced futures trading in Bitcoin where the underlying asset itself is a mystery!
  3. Regulatory & digital risks- Gold has continued and will continue to remain an asset class for several decades in the future as well. However, in the current scenario, will governments across the globe agree to allow trading in an asset class which they have no say or control in ? Hence doubts continue to remain in terms of the trading legalities in terms of cryptocurrency trading in India. Also, considering these are digital currencies, there also seems to be a risk of hacking which could completely destroy the digital value and lead to a financial meltdown as was seen in the case of the South Korean crypto currency exchange filing for bankruptcy.

Even though currently, Bitcoin seems to have a clear edge over precious metals like Gold & silver, from a purely technical perspective, Gold and bitcoin seem to be completely inversely related. Hence any major downside in the crypto currency market could lead to a lot of money supply flowing from Bitcoin to Gold or even silver which are currently grossly undervalued. Considering the kind of volatility which traders in the crypto currency market have faced in 2017, only traders with good knowledge in technical analysis especially in candlestick patterns & momentum indicators along with Fibonacci projection & retracement would have survived or even thrived & made money.

2018 could also be a great year for investors, however, with the risk that if it isn’t, it shouldn’t matter to people who are already using technical analysis & smart options strategies as one always tends to find a way of making profits with adequate knowledge of these subjects !

6th January 2018

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