Cryptocurrencies, such as Bitcoin, is being hailed as one of the best hedges against inflation – even better than other traditional investments like gold.
Traditional investments like gold, stocks, and real estate are vulnerable to inflation caused by central banks printing money. But the digital asset blockchain and cryptocurrencies don’t have a central authority that can inflate or deflate the supply of digital currencies at will.
Bitcoin and other cryptocurrencies are considered as an asset class in themselves, and is worth considering as you build your diversified portfolio for retirement.
Here are the top reasons why cryptocurrencies are a better investment than gold:
1. Digital currencies are deflationary
Digital currencies like Bitcoin or Ethereum are deflationary by design. The supply of these cryptocurrencies is mathematically limited, such as 21 million for Bitcoin. This literally means that only 21 million Bitcoins will ever exist.
As more people buy digital currencies the scarcity will increase, driving prices higher over time. This contrasts with traditional fiat money which central banks can produce at will. While gold is rare, the supply of mined gold can be increased.
2. Cryptocurrencies are borderless and easily transferable
Cryptocurrencies like Bitcoin or Ethereum don’t belong to any country, frontiers, or jurisdictions. There’s no central bank involved in transactions and settlements in the digital asset blockchain – everything is peer-to-peer (P2P). Digital currencies are bearer instruments and transactions are anonymous.
Conventional gold can’t be transferred to another person in an easy way, because you need the physical presence of the gold in order for it to stay in your possession. And if you want to transfer ownership of that precious metal? Well, there’s additional fees and paperwork involved.
3. Gold is hard to liquidate when market conditions are bad
Gold is a static asset which you can’t easily turn into cash. You may have to sell your gold at a lower price just to get some money – and that’s not always easy. Additionally, the premium on physical gold from authorised dealers may vary significantly from time to time.
In stark contrast, digital currencies are easy to liquidate. You can sell or trade any portion of your holdings at anytime – even when the market conditions are not as favorable.
4. Cryptocurrencies aren’t correlated to traditional markets
Digital currencies like Bitcoin or Ethereum are independent of any economic conditions – including stock market crashes and recessions.
This means that while your portfolio is affected by the volatility in the stock or gold market, your cryptocurrency holdings will remain unaffected.
5. Cryptocurrencies are fungible assets
Digital currencies are not attached to any commodity or instrument outside of their blockchain protocols – which means this type of asset class can’t be easily valued based on traditional financial metrics like P/E ratios for stocks or gold/silver ratios in the market.
Basically, cryptocurrencies have no correlation to conventional assets. This characteristic may lead to more stability when other markets become volatile – making it an ideal diversification tool for your retirement and other financial accounts.
Secure Your Financial Future with Key Coin Assets
Cryptocurrencies are still an emerging asset class, but it has the potential to become a long-term reliable alternative investment.
We believe it’s worthwhile to include digital currencies and other investments like crypto ETFs along with other conventional assets like stocks and bonds inside your diversified portfolio.
Key Coin Assets is dedicated to helping you discover the benefits of cryptocurrencies and the digital assets as part of your journey to building real wealth. Aside from investments, we can also help you with other blockchain applications such as SEO blockchain and the digital marketing blockchain.