AUSTIN, Texas, Aug. 2, 2022 /PRNewswire/ — Bitcoin and other cryptocurrencies have been dubbed “digital gold,” but how well do these assets compare to actual physical gold? U.S. Money Reserve, America's Gold Authority®, explores this and more.
CRYPTO GOES BROKE | GOLD REMAINS STRONG IN JULY 2022
The cryptocurrency market has lost almost $2 trillion in market capitalization since November 2021, according to data from CoinMarketCap. Crypto hedge fund Three Arrows Capital went from managing $10 billion in assets to filing for bankruptcy in the first half of the year. Over roughly the same period, crypto lender Celsius went from managing over $25 billion in assets to managing only $167 million. Most who purchased and held cryptocurrencies during the last boom have seen their holdings drastically drop.
A Barron's article (“Gold Prices Are Holding Up as Stocks, Bonds, and Crypto Plunge”) dated June 17, 2022, sums up crypto's recent troubles as “at odds with the prevailing narrative of the past few years, which preached that these digital assets would take the place of the yellow metal as a haven in turbulent times. It should be clear now that the opposite is true, at least this time.” The limited history of cryptocurrency makes it difficult to clearly define its role in a portfolio and determine if it acts as a safe haven over the long term or if it behaves more similarly to speculative assets.
14 YEARS VERSUS OVER 5,000 YEARS
The first cryptocurrency, Bitcoin, emerged in 2009. By contrast, gold's origins date back more than 5,000 years. Gold coins premiered as a form of currency around 550 B.C., pre-dating the introduction of paper money.
Given that cryptocurrency is in its infancy, the digital asset has a limited track record. There can be significant risk involved in putting your money into a relatively new asset class. The price of a cryptocurrency can be extremely volatile. Holdings that may be worth thousands of dollars today might only be worth only hundreds tomorrow, and there's no guarantee the price will go up again.
Gold, however, has a substantial history. One of the most important attributes of physical gold is that it is a tangible asset.
In short, gold's tangible nature and intrinsic benefits make it hard to be fully replaced by a digital asset.
GOLD'S RELEVANCE IN JULY 2022
Gold is considered a traditional hedge against the stock market—and, now more than ever during the current economic turbulence, gold should be considered as part of a diversified portfolio. Watch the video below for more information on gold versus crypto.
For a deeper understanding of the differences between cryptocurrency and gold, read this article from U.S. Money Reserve's Chief Procurement Officer and Master Numismatist John Rothans, which details the differences.
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