Bitcoin and gold are both alternative assets with similar features. Each embodying a monetary value, they are uncorrelated to most market risk but a natural hedge to systematic risk.
In the context of today’s systematic risk, it is worth comparing and contrasting the two assets to see what suits investors. Both assets are of limited supply.
Gold is the more traditional asset class, with an established track record in acceptance and use with disadvantages being its physical nature, it being hard to transport, hard to divide and although it has use in electronics it is limited in developing an intrinsic value.
By comparison, Bitcoin is highly divisible, easy to transport and send and has significant scope in developing intrinsic value. Bitcoin and the protocol outlined by Satoshi Nakamoto are being built into a new, de-centralised financial system and the monetary value of Bitcoin underwrites this cutting-edge technology. However, it is not well understood, it has been highly volatile, there have been serious incidents of hacking and the project faces significant hurdles as the new kid on the block.
Other precious metals such as silver may also provide a price-point favourable to investors, silver also having greater industrial uses giving it intrinsic value and equities in precious metals have also been considered in the past – but a deeper dive must be taken into individual companies.
We have seen a significant increase in interest for such assets with concerns over fiat currency and systematic risk spreading.
What to choose to diversify a portfolio?
An individual’s choice will depend on their own personal characteristics. We have found that Bitcoin does not have a dominant age-group and is more accessible; opening an account at Mine is easier than opening a bank account.
Once investors hold Bitcoin, they can invest in other projects, including gold-backed cryptocurrencies. Gold ETFs are another easy way to gain exposure to the asset class.
At Mine we have developed high security solutions to store cryptocurrencies, including the option of custody and insurance. We look forward to the opportunity to onboard you and assist with your need to hedge for systematic risk.