Bullion vs Gold-Backed Cryptocurrencies: Which is Better?

Gold

Gold and cryptocurrencies have become two of the most popular assets used for investing in the investment world. For instance, gold is considered a secure investment due to its historical value. Its value isn’t directly impacted by specific economic and political downturns, including inflation. On the other hand, cryptocurrencies are digital assets that have gained popularity due to their profit potential. This is where gold-backed cryptocurrencies enter the picture.   

Aside from gold bullion, gold-backed cryptos have become one of the sought-after options for precious metal investments. Although the price for each token depends on its price equivalent to traditional gold, these crypto-related investments are still operated by blockchain technology. Thus, since gold serves as a protection against some economic issues, many investors have turned to gold bullion or gold-backed cryptocurrencies as investments. But, if you have to choose one, you may wonder which is suitable for your situation.    

Keep reading this article to learn which is better between gold bullion and gold-backed cryptocurrencies.  

Gold Bullion: Pros And Cons  

Digital-Currency

To determine whether investing in gold bullion like the NZ coins is much better than gold-backed cryptocurrency assets, you need to familiarize yourself with the advantages and disadvantages of bullion. These can include: 

Pros: 

Typically, gold bullion as a precious metal investment can be more beneficial in the following ways: 

  • Stable Asset Due To Its Time-Tested Value: This is one of the benefits of buying gold bullion as an investment. Unlike other assets, gold’s price doesn’t diminish with time. Gold will remain a valuable asset whether you purchase this precious metal within ten days or after ten years. It makes it a stable investment that deserves to be added to your portfolio.  
  • Low Volatility: Unlike cryptocurrencies, gold bullion has low volatility. Its prices don’t fluctuate unexpectedly within a certain period. Many people opt to invest in bullion for longevity and price stability.   

Cons: 

Investing in gold bullion also comes with some disadvantages. These can include: 

  • Physical Limitations: Bullion as an investment asset has physical limitations. For instance, you can’t have easy access to physical gold without the assistance of specific people or entities who will hold and take care of your investment for you. Whether they’re a bank or broker, you probably need them to have access to your bullion. Moreover, gold bullion has storage and transportation requirements. For example, you need a storage area to safely keep your gold as long as it’s under your possession and ownership. Also, if you need to transport it, you may have to obtain a transportation permit to ensure everything is legal. These limitations can cause more hassle for investors like you.  
  • Several Assessments and Certifications Required: Like the authentic ones, many gold bullions mixed with less valuable precious metals are also out of control in the market. Because of this, you need to check the legitimacy of the physical gold by conducting assessments and getting some certifications. However, doing so can be a complicated and time-consuming process. Lastly, trading gold bullion in a foreign market can be tricky as some platforms may require some certifications before you can make certain trading positions.  

Gold-Backed Cryptocurrencies: Pros And Cons  

Now that you’re familiar with the pros and cons of bullion, it’s time to look into the upsides and downsides of gold-backed cryptocurrencies. These can include: 

Pros: 

  • Easy And Quick Access: Unlike their physical counterparts, the gold-backed cryptocurrencies come with minimal limitations. For example, these digital assets don’t need physical storage or complicated transportation requirements. They also don’t require authentication processes before you can execute trades out of them. As long as you use an online trading platform, you can easily access gold-backed cryptocurrencies without restrictions.  
  • Ability To Be Divided Into Smaller Units: Another advantage of investing in gold-backed cryptocurrencies is they’re divisible, which means they can be divided into smaller portions. It is because they operate digitally compared to bullion. For example, if you’re a trader, you can trade your gold-backed cryptocurrencies in fewer amounts without hassle.   

Cons: 

Gold-backed crypto can also be disadvantageous to your investment efforts in the following ways: 

  • Illegal Transactions: Cryptocurrencies can be used for unlawful transactions since the central government doesn’t regulate them. They have become a convenient way for criminals to get away with their wrongdoings because they know the government can’t track them.  
  • Financial Losses: Generally, blockchain technology is considered hack-proof due to its advanced encryption and other security mechanisms. However, hackers can still find ways to get into the user’s account and access their cryptocurrencies. When this happens, you may have to deal with significant financial losses.   

Conclusion  

Typically, bullion and gold-backed cryptocurrencies are good investment assets for your diversified portfolio. But, if you want to choose which one is better, it’s best to keep the information mentioned above in mind to educate yourself about the pros and cons of each option. In doing so, you’ll know which one will work best for your situation. Nonetheless, having any or both of them as an investment can be the perfect way to make your portfolio more solid.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.