The Gold vs Crypto debate has been a hot topic among investors and traders ever since the concept of digital currency gained considerable transactions in the 2010s. While it is a good idea to diversify your trading portfolio, choosing between Gold trading and Cryptocurrency trading can be challenging. However, regardless of which trading type you choose, it’s important to ensure you’re putting your eggs in the right basket.
Trading Gold vs Crypto represents two different markets a trader should focus on. Despite gold being one of the world’s most traded commodities for millennia, cryptocurrency is a peer-to-peer decentralized digital currency that was first ‘mined’ in 2009. As with so many other seemingly existential battles between the ‘Gold bugs’ and ‘Crypto kids’, it is necessary to look more closely at the key factors traders should consider prior to choosing Gold vs Crypto.
What is Gold Trading?
Gold trading is nothing more than a means of hedging against inflation or profiting from price fluctuations in the market. The practice of trading gold is considered a safe haven as the gold market offers high liquidity and excellent opportunities for profiting in virtually all environments due to its unique position within the global economic and political structures.
Several reasons can motivate you to trade gold. The most significant aspect is the steady rise in its value over time, making it a valuable asset in times of uncertainty, such as those we’ve experienced lately. Gold trading can be done both long and short, as you can profit from rising and falling gold markets – and not necessarily follow the traditional mantra of ‘buy low and sell high’.
No matter what position you take, the aim of gold trading is to predict the market’s future direction. The further the market moves in the direction you predicted, the more you would profit, whereas the further the market moves against you, the greater your losses.
Different types of Gold Trading
The process of trading gold used to be difficult once as you had to buy and sell the actual metal itself. Technology has streamlined the process of gold trading, making it efficient, easy, and secure. The following are the different ways gold can be traded in the market today.
- Bullions – Bullions are the physical form of gold usually being traded in the form of bars or specialized coins. The trading value of this precious metal is determined by the type and weight of bullion. Trading physical gold can seem more convenient than acquiring large quantities of oil, however, you must still consider transaction fees, storage costs, and insurance. Billions can be risky to trade since they need to be kept safe from thefts and require more security.
- CFDs: A contract for difference (CFD) is a contract to buy or sell a specific amount of gold on a short-term basis. Instead of buying gold physically, traders can speculate on its price and gain profits from it. CFDs have an expiry date and the return is determined by changes in the price during the duration of the contract.
- Certificates or Bonds – Gold bonds or certificates are documents that represent ownership of a specific amount or value of gold, instead of the gold itself. Trading gold bonds tend to offer a decent and stable cash stream.
- Futures – Gold futures are basically agreements between buyers and sellers when they purchase gold at a predetermined price on a given date. The fact that gold futures are traded on exchange platforms gives them more leverage than dealing in physical gold. Returns are determined by the price fluctuations between when the contract is agreed upon and when it expires.
- ETFs – Gold exchange-traded funds (ETFs) consist of assets backed by gold. Similar to stocks, they can usually be purchased from a broker or stock exchange. They allow you to buy a pool of securities, like commodities, without having to purchase all the individual assets. ETFs have low costs, but their value is linked to gold prices.
Gold trading practice is very similar to Forex trading. Retail investors can use spread-betting platforms to buy or sell gold based on their beliefs about whether a rise in price is likely or not. The MT4 platform is very popular for trading gold. Gold is pegged to the US dollar under the gold standard, the same way the world’s major currencies are pegged to it. The XAU/USD pair offers Forex traders some of the best conditions for trading gold. Open a Forex account now to get started with gold trading.
What Speaks in Favor of Gold Trading?
There’s a reason why putting money in this precious yellow metal is often referred to as a safe haven. Listed below are some of the benefits of trading gold.
- Inflation Hedge: The benefits associated with trading gold include its hedging ability against inflation. In contrast to most trading instruments, gold retains its purchasing power during inflation.
- Best for Long-Term Gains: Gold has proven to be an ideal asset option for hundreds of years by delivering better returns. Because of this, gold is considered a long-term store of value.
- High Liquidity: Another advantage of gold investing is its higher liquidity compared to other trading options. Having this property of gold makes it easy for investors to turn their traders into cash whenever needed.
- Asset Security: Another benefit of trading gold is the security of your capital. The price of gold has gradually increased over time, except for rare exceptions.
- Portfolio Diversification: Trading gold is also a good option due to its portfolio diversification. Since gold is a highly volatile asset, it is always better to trade it with other assets, since the risk is lower.
Trading gold is also considered a beneficial option due to the wide range of financial instruments available to trade with gold, from futures to stocks and gold bonds.
What is Crypto Trading?
Crypto trading involves speculating on future cryptocurrency price movements using a trading account or buying and selling different virtual coins and exchanging one for another in hopes of making a profit. While cryptocurrencies appeared in the financial world several years ago, the crypto market gained traction in 2017 among novice and experienced investors, becoming one of the top financial destinations.
Cryptocurrencies are digital currencies that are protected by encryption using blockchain technology. Cryptocurrencies are assets similar to gold and silver. Large-scale Bitcoin mining farms and pools became popular after early Bitcoin investors realized that their fractional Bitcoins were worth $0.09, making crypto a popular purchase. As the Covid-19 pandemic hit in 2020, traders noticed that Bitcoin prices weren’t falling in tandem with stock prices. The rise in institutional investments led to Bitcoin’s value reaching $61,000 by April 2021.
This crypto craze doesn’t seem to be going away anytime soon, as prices continue to skyrocket and new trading opportunities keep opening up. While several ways exist to generate income with cryptocurrencies, crypto trading has been touted as the most profitable method due to its ability to leverage price fluctuations that yield quick returns.
Different types of Crypto Trading
Trading crypto appears to be everyone’s obsession! After all, why not? Crypto is the wave of the future! It has wreaked havoc not just in the finance sector, but also across a wide range of industries, including medical services, retail, tourism, automotive, and more. Let’s explore the different ways in which traders can profit from trading Crypto.
- Crypto CFDs – A crypto CFD is similar to a traditional CFD, except that cryptocurrencies are traded instead of fiat currency. Trading crypto CFDs is attractive to traders who want to profit from price movement without being concerned with the technical process of buying and storing cryptocurrencies securely. As crypto CFDs adhere to all financial regulations, you need not worry about their legality when you buy and sell them.
- Crypto Assets – Crypto assets are relatively simple to understand. A cryptocurrency asset is a digital coin that can be purchased on a cryptocurrency exchange and stored in a crypto wallet. The most well-known crypto assets are Bitcoin, Litecoin, and Ethereum. Unlike Crypto CFDs, trading Crypto Assets requires technical knowledge of cryptocurrency and its functions. The responsibility of buying and storing cryptocurrency securely lies with traders, which can be difficult for first-time buyers.
With the emergence of the cryptocurrency market, the possibilities for profit-making have also increased in crypto trading. While Bitcoin and Ethereum are among the top coins, there are hundreds of other cryptocurrencies that are generating significant trading volume. AximTrade is the ideal choice for crypto traders looking for the best conditions to start trading with a small amount of capital. Know the Difference Between Crypto CFDs and Crypto Assets in detail!
What Speaks in Favor of Crypto Trading?
The exponential growth of cryptocurrency in recent years is probably familiar to almost everyone in the world today, and many of them are curious to learn more about it. Below are some of the benefits of trading crypto, including a few explanations for why it has become so popular.
- Availability of Wide Selection: Crypto traders can choose from a wide selection of cryptocurrencies. There are over 18,000 cryptocurrencies in existence as of March 2022. New tokens are popping up all the time, each with its own use case and backstory. Yet, if you want to avoid losses and scams, make sure you conduct your own research. With AximTrade, you have the ability to trade on 35+ top cryptocurrencies on a powerful yet user-friendly platform.
- Potential For High Returns: One of the key advantages of bitcoin buys is their high return on investment. Historically, cryptocurrency has provided much higher returns than traditional assets such as gold and the stock market.
- Enhanced liquidity of crypto markets: Liquidity refers to how quickly and easily it is possible to convert cryptocurrency into cash without affecting the market price. A high level of liquidity leads to better pricing, faster transaction times, and more accurate technical analysis. As a result, you can minimize risk and make quick profits.
- Ability to Trade 24/7: Unlike the forex and stock markets, which operate 24/5, the crypto market is usually open 24/7 since there is no centralized governance. Crypto trading is a tremendous opportunity, especially for part-time traders with full-time jobs, as it allows them to trade in their spare time.
- Lower Fraud Risk: Since buyers do not have to reveal their confidential information to the seller or intermediaries, cryptocurrency investment is less vulnerable to fraud. Moreover, since the entire transaction is built on blockchain technology, consumers can expect exceptional levels of security.
When it comes to cryptocurrency trading with AximTrade, our simple online application process and instant online verification will enable you to create a trading account in less than five minutes. Spread betting, scalping, position trading, range trading, swing trading, and intraday trading are all possible ways to trade crypto.
Gold vs Crypto trading – Comparing the Two!
In the debate over Gold vs Crypto, gold is seen as one of the most secure and stable asset options for thousands of years. Moreover, its volatility is almost one-fifth the size of cryptocurrency, and it is not subject to the same competition risks. The popularity of digital currencies, such as Bitcoin, has undermined gold’s reputation as a sound investment.
Since both gold and crypto offer significant benefits, let’s have a closer look at their key differences to understand the upsides and downsides of Gold vs Crypto.
1. Regulation of the bodies:
When comparing the regulatory bodies of both Gold vs Crypto, Gold has a well-established trading, weighing, and tracking system. It’s hard to steal or duplicate since it’s highly regulated. When trading gold, a registered broker or dealer is the only place to buy it; however, you should only purchase physical gold if it can be safely stored.
Crypto is also hard to steal and duplicate, thanks to its encrypted and decentralized system. A few exceptions apply to its use across country borders, but generally, it’s legal. However, there is not yet a regulatory infrastructure in place to ensure that cryptocurrency users are safe. Furthermore, the anonymity of cryptocurrency makes regulation challenging.
2. Utility as a means of exchange:
The utility of Gold vs Crypto as a means of exchange is debatable. Medium of exchange refers to something that can be exchanged for goods and services.
Gold has been used historically in a wide range of applications, such as currency, luxury items, specialized applications in dentistry, electronics, and much more. Gold has maintained its value despite falls in other asset values because of its cross-functional utility.
Crypto is limited in its utility. To date, it has only been used as a speculative investment and digital currency. However, there is an emerging financial technology called decentralized finance that uses cryptocurrency for financial transactions. In this emerging field of technology, crypto can be used for lending, borrowing, and possibly more.
3. Return On Investment (ROI) of the Asset:
The fundamental factor distinguishing Gold vs Crypto trading is the return on investment (ROI). A report claims that, in 2016, if you invested AED 50 in gold, you would have received a 36% return for a total of AED 67 in 2021. In contrast, if you had invested the same amount in crypto during the same period, your ROI would have been AED 541.
However, this does not mean you should invest in cryptocurrency blindly. Because ROI isn’t the only factor to consider when trading your hard-earned money in assets. Considering multiple factors such as safety, liquidity, and volatility would be more beneficial.
4. Volatility of the Asset:
One of the most significant differences between Gold vs Crypto trading is the volatility of the two assets. Crypto is historically subject to media effects, investor sentiment, regulatory actions, and hype. For example, in January 2018, bitcoin peaked at around $20,000. Within a year, the price was over $4,000. In November 2021, it’s worth approximately $68,150. Significant volatility in Bitcoin will have a direct impact on most cryptocurrencies.
This volatility is not inherent to gold due to the reasons outlined above, making it a more secure investment. Gold prices are considerably less volatile. As inflation rises and currencies weaken, gold prices generally rise. It also rises when central banks of large countries begin holding gold reserves and purchasing more gold.
5. Liquidity of the Market:
As far as market liquidity is concerned, both gold and crypto are highly liquid. For example, gold is always in high demand for investment, ornamentation, and other industrial applications. As a result, all types of traders are participating in gold trading. In addition, Statista found that gold had the third-highest average daily trade volume at 145.5 billion US dollars.
When it comes to the liquidity of the crypto market, the advent of crypto trading platforms has facilitated easy trading of Bitcoin and other cryptocurrencies. Furthermore, several Fintech payment solutions and big companies like Microsoft, PayPal, and Starbucks now accept bitcoin and other digital currencies as payment.
Gold vs Crypto– Which is a better trading option?
For too long, Gold vs Crypto trading has been treated as alternatives to one another. However, the debate has been settled. Any trader who wants to build a healthy trading portfolio needs both. Gold is a physical commodity, not a half-baked vehicle that only offers exposure. And blockchain-based cryptocurrencies like Bitcoin, Ethereum, and Binance have gained a lot of attention and are becoming too big to ignore.
As we move toward a world dominated by financial technology, it will be necessary to allocate crypto and physical gold as complementary products rather than as competitors.
Gold vs Crypto: Which is the better inflation hedge?
The majority of investors typically look for inflation-hedging assets for their portfolios so that they can protect themselves from inflationary pressures. While gold and cryptocurrency are both potential inflation hedges, one may be more suitable than the other depending on individual preferences.
Gold‘s reputation as a store of value and hedge against inflation is based on its scarcity and intrinsic worth. During economic uncertainty, investors tend to turn to gold due to its value not being subject to the same risks as paper currency. Its finite supply also contributes to its purchasing power over time. However, factors such as mining production, demand from jewelry and industrial sectors, and central bank purchases can influence its value. Nonetheless, gold remains a popular investment due to its historical reputation as a safe haven and store of value.
On the other hand, Cryptocurrency is a digital/virtual currency that uses cryptography for security and operates independently of central authorities. They are decentralized, and not controlled by any single entity. Cryptocurrencies like Bitcoin have a limited supply, protecting against inflation by reducing oversupply risk. However, their value is influenced by factors beyond limited supply, such as market sentiment, which can cause prices to rise or fall.
Typically, gold is known for its effectiveness in countering inflation and its stability in comparison to cryptocurrency which can be more volatile. Nonetheless, cryptocurrency presents an opportunity for short-term gains and may appeal more to younger investors who are well-versed in new technologies.
Discover how Gen Z Investors can profit from turbulent economic times to help you out!
Trade both Gold and Crypto with AximTrade
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Gold vs Crypto Trading – FAQ
Why is trading gold the best?
Gold is historically valuable and its rarity and durability make it an attractive investment option. It can also help diversify your portfolio, act as a hedge against inflation, and is highly liquid with global market demand.
Is crypto better than stock trading?
Crypto and stock trading have distinct advantages and disadvantages. Crypto trading offers high returns, accessibility, and decentralized nature, but can also be highly volatile, unregulated, and lacking intrinsic value. Whereas stock trading offers ownership, diversification, and regulatory protection, it is also subject to crashes and requires long-term investments.
Is crypto an alternative to gold?
There are key differences between crypto and gold as alternative investments. Historically, gold has been a means of storing value, traded in both physical and paper forms, and influenced by supply and demand. The value of cryptos is based on market demand, regulation, and adoption rates. Cryptos are blockchain-based digital assets.
Is gold a better investment than crypto?
Gold is a centuries-old physical asset used to store value, while cryptocurrencies like Bitcoin are digital assets that emerged in the last decade. Gold is stable and used to hedge inflation but lacks dividends and is subject to supply and demand fluctuations. Cryptocurrencies are highly volatile, unbacked by physical assets, and their value is determined by market demand.
Is Bitcoin a Better Investment Than Gold?
Bitcoin and other cryptocurrencies are digital assets that emerged in the last decade, while gold is a centuries-old physical asset. Gold is stable and used to hedge inflation, but lacks dividends and is subject to supply and demand fluctuations. The value of cryptocurrencies is determined by market forces, as they are not backed by physical assets. Their huge price swings and regulatory risks make them risky.
Why investing in gold is better than Bitcoin?
Gold and Bitcoin have unique pros and cons for investors. Gold is a physical asset with a long history as a store of value and is considered a safe haven during economic uncertainty. Meanwhile, Bitcoin is a decentralized digital currency with a limited supply, which may have long-term value. However, Bitcoin’s price tends to be more volatile than gold, with significant price swings in short periods.
What is better than gold to invest in?
Forex trading has advantages over gold, including high liquidity, lower costs, accessibility, flexibility, and diversification. With a daily trading volume of over $7.5 trillion, forex is easy to trade with less risk of market manipulation. Forex trading requires only a computer, an internet connection, and a trading account, making it more accessible and cheaper than gold trading.
Should you buy cryptocurrency or gold?
Cryptocurrency is a decentralized digital asset based on blockchain technology, allowing for secure and transparent transactions. Its highly volatile price and lack of regulation make it a risky investment with the potential for fraud. In contrast, gold has been a stable store of value for centuries and can hedge against inflation. Consider investment goals, risk tolerance, and horizon before deciding to invest.
