Aug 2021


Aug 2021

Should I Invest in precious metals or cryptocurrency?

By StoneX Bullion


After the economic uncertainty that came with the Covid-19 Pandemic, people are considering different ways to invest their hard-earned money. Precious metals and cryptocurrency are two alternatives that are gaining popularity since they are both distinct and profitable in their own right. Investors of all levels are still arguing whether to invest in precious metals such as gold and silver or cryptocurrencies such as Bitcoin and Ethereum. It can be tough to decide where to invest, so let's look at the benefits of both.

What are Precious Metals? 

Precious metals are a time-honored investing method. Investors have been putting their money into assets like gold, silver, and platinum for millennia, and this permanence makes precious metals popularly thought of as a ‘safe’ investment. They are also widely used in the manufacture of jewelry and automobiles, and more. 

We are talking about rare metals with significant economic value. Scarcity, high demand in industrial operations, and their function as a store of value all contribute to their high worth. The four most prevalent precious metals in investment purposes are gold, silver, palladium and platinum.

Benefits of Investing in Precious Metals 

Filling your treasure chest with precious metals can yield optimal financial rewards. Let’s see why.

1. Scarcity

Precious metals are a finite resource. Their increasing use in industry has further added to their popularity amongst investors as buying now increases the chance of obtaining maximum return in the long run. 

2. Safe-haven

Precious metals are commonly seen as safe haven assets. Their prices fluctuate in periods of heightened uncertainty when other investments suffer losses - which makes them a great investment addition to any portfolio.

3. Diversification

You know the old refrain ‘don’t put all your eggs in one basket’? It rings particularly true when it comes to investments. When you invest in precious metals, there are different options to diversify your investment portfolio. You can purchase gold, silver, platinum, palladium or rhodium, and receive different returns.

4. Privacy

If you are looking for privacy or confidentiality, physical metals are one of the very few investable assets that are a great match for you. There is no need to involve financial organisations and you can keep your investments without any external monitoring or fees.

Risks with Gold and Precious Metal Investments

Investing in precious metals, like any other type of investment, entails some risks. While they provide strong returns and are used to build wealth, they are not suitable for every investor.

1. Volatility 

The price of precious metals can fluctuate and is determined by market action. The market value is similar to a seesaw that alternately rises and falls, and it can fall below the price you paid for it. As a result, there is a chance that your returns will be less than your purchase price, depending on when you choose to sell.

2. Capital Gains Tax

When the value of precious metals rises, they can be sold. But keep in mind that it can potentially be taxed. Depending on where you live, you may be required to pay Capital Gains Tax. However, you can only be taxed if you intend to sell the precious metal for cash.

Benefits of investing in cryptocurrency

As significant names like Elon Musk and the Bank of New York Mellon invest in Bitcoin and other crypto, the term "digital gold" is being used in describing cryptocurrencies. You must have been living under a rock if you haven’t heard of the term ‘cryptocurrency’. Although its volatility scares some people, if done right, crypto can generate decent returns. Let’s take a look at why.

1. Direct control

Crypto investment provides total independence and control. You don’t need to deal with banks or other financial institutions.

2. Transparency

Blockchain technology monitors and records every transaction of cryptocurrency in a totally transparent system. A transaction cannot be changed or cancelled once it is made.

3. Simplicity

Investing in cryptocurrencies is generally simple and uncomplicated compared to stocks and other assets that are time-consuming. You don’t need to sign agreements or visit banks as everything is performed digitally.

Challenges of Crypto

Many cryptocurrencies use blockchain technology, which is a decentralized system that tracks the transaction of digital assets. As complex as the technology is, infrastructure augmentations in the name of boosting scalability have resulted in vulnerabilities.

To meet global demand, cryptocurrencies like Bitcoin rely on off-chain transactions, in which users buy and sell coins outside of the blockchain network, effectively undercutting the fundamental purpose of utilizing the technology in the first place. While off-chain transactions are intended to circumvent blockchain limits, they actually introduce security flaws since they can be modified before being written back into the blockchain, allowing for foul play with people's money.

Processing blockchain transactions for Bitcoin exchanges is also inefficient, taking up a lot of time and energy. In fact, it was proven earlier this year that Bitcoin consumes more electricity per year than the entire country of Argentina. Despite the massive energy consumption, fewer than 10 transactions are written to a Blockchain per second, prompting critics to accuse cryptocurrency miners of reckless environmental damage for a merely speculative asset.

Instability Is an Inherent Part of the Crypto World

Cryptocurrencies, unlike precious metals, have no intrinsic value. They serve no purpose other than to be a vehicle of exchange. And because they are considered as investment assets, with anybody from casual investors to institutional investors seeing what returns they can make by dabbling in crypto, they remain highly unpredictable, surging when it is fashionable and plummeting when individuals cash out on their investment. For example, Bitcoin's price halved between February and March of last year, quadrupled by the end of the year, set record highs in January, and then plunged 15% just a few months later. Physical precious metals, on the other hand, can be found in medical equipment, electrical devices, jewelry, and other places. This means that there is always a steady demand for the precious metal, which keeps the prices of precious metals relatively stable.

Make Better Investment Decisions with the Best of Both Worlds

When it comes down to it, value investing is more than just an investment strategy; it's also a life philosophy. The value mindset enables you to think without regard for hype or what the mainstream media wants you to believe. Investors can choose between the two or only one, based on their capital, risk tolerance, and if they are in it for the long or short term. Both cryptocurrencies and precious metals have advantages and disadvantages, and it is recommended that investors include both in their portfolios to help protect against inflation.

The advantages of precious metals and cryptocurrencies are not the same. However, it is important to realize that the cryptocurrency market can be extremely volatile. Take a look at the price over the last few months...a simple tweet can cause prices to plummet. Market volatility over the previous decade has pushed an increasing number of consumers to invest in precious metals, which are viewed as a safe haven investment. Bullion metals such as gold and silver can be found in a wide range of investment portfolios. This is because they can weather periods of economic turmoil.

Precious metals can operate as a hedge against future unreliability, which is why they are widely acknowledged as an economic asset around the world. Furthermore, they are highly liquid and can be utilized for exchanges. This creates an investment path that allows for quick, efficient exchanges and, if necessary, liquidations.With all of the discussion about which asset would yield higher long-term returns, it's easy to overlook the fact that there is a third alternative. Furthermore, it integrates the two groups in a seamless manner. This is why we created something that combines the best of both worlds. Check out our bitcoin product, which is available in limited mintage in both silver and gold and allows you to enjoy the glitz and glitter of cryptocurrencies without the market drama.