Is cryptocurrency bitcoin a better asset than gold for hedge against inflation? – Livemint

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  • Batting in favour of cryptocurrencies, the expert mentioned 4 features that make bitcoins a better asset than gold

Cryptocurrency vs gold: Precious yellow metal and bitcoins are two assets that are independent from the government. Both gold and cryptocurrencies are limited assets and hence prices of both of these assets appreciate or depreciate based on its demand and supply. As cryptos have been giving stellar returns amid uncertainty in regulations, there is a debate going on whether gold would lose sheen in race against bitcoins.
Speaking on similarities between gold and cryptocurrencies; Manoj Dalmia, Founder and Director at Proaasetz Exchange said, “Like gold, cryptocurrencies are also a limited digital asset as there will never be more bitcoin released. This makes bitcoins similar to gold in terms of scarcity. Unlike fiat money, where bank deposits can be depreciated due to inflation controlled by the government, both bitcoins and gold are independent from the government.”
On how cryptocurrencies may give run for money to gold in asset segment; Vinshu Gupta, Founder & Director, Nonceblox Blockchain Studio said, “For long Gold has been the defacto hedge against inflation. It can be stolen, need to be stored and would usually need maintenance. It was one of the few trusted investments for old money but not anymore. Investors have started to look at bitcoins as future gold. It is purely decentralised, has no storage or maintenance issues and can’t be stolen. Calling it only a hedge might not be full justice, I would rather call it the most lucrative asset on the face of earth and mars.”
Vinshu Gupta went on to add that Cryptocurrencies median annual RoI (Return on Investment) is 408 per cent. “When we compare it with 5-7 per cent rate of inflation, bitcoins not only hedges your position but generates wealth for generations to come,” Vinshu Gupta said.
Asked about cryptocurrency vs gold and better choice for hedge against inflation; Amit Gupta, MD at SAG Infotech said, “Many institutional investors seem to be turning to bitcoins, conceivably viewing it as a better investment option than gold, especially when it comes to hedge against inflation. In April, crypto exchange platform Coinbase revealed in its first-quarter report that the company hosted $335 billion worth of trades in that quarter, with more than $215 billion coming in from 8,000 institutional investors.” Amit Gupta said that these deep-pocketed investors were encouraged to invest in bitcoins and other similar cryptocurrencies because of their inherent protection against inflation.
Batting in favour of cryptocurrencies against gold; Manoj Dalmia of Proaasetz Exchange listed out below-mentioned 4 features that make bitcoins not just similar but a better asset than gold:
1] Rarity: Bitcoin is rare. It cannot be created at will; there are only 21 million of them, and no one can create more. That means that no government can control it or fake it. No one is going to create more gold which will be feasible. The scarcity of gold keeps on changing, depending on how much you put into finding it.
2] Durability: Both bitcoins and gold are almost perfectly durable. As long as the internet operates, bitcoins will be in use. As far back as it can be traced, gold has been used to make jewelry, trade, etc.
3] Divisibility: Bitcoin can be divided into individual satoshis, with 100,000,000 satoshis making up 1 BTC. Gold cannot be divided as easily or as precisely but it can be minted in smaller denominations.
4] Hard to be fake: 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.
However, reminding the risk factor involved in cryptocurrency investments; Vinit Khandare, CEO & Founder at MyFundBazaar said, “Bitcoins are an unregulated asset class not backed by any sovereign government. These digital coins carry more risk & have increasing volatility. Moreover, bitcoins are not backed up with sufficient history to establish an understanding of its true relation with inflation on a long-term basis.”
Disclaimer: The views and recommendations made above are those of individual analysts or personal finance companies, and not of Mint.
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