Cryptocurrency has made plenty of headlines over the past few years, enticing lots of interest from the financial community. Still, there remains a question of how reliably the digital currency can perform as an asset, especially when compared to gold. To explore this idea, we looked to U.S. Money Reserve, a leading distributor of gold coins. By using information from the company’s resources, we can provide readers with a better understanding of the nuances of this debate.
To dive into this analysis, one must first understand the backgrounds behind these two very different assets. Gold is a precious metal that has become prized for its relative rarity and versatility. Not only is it used by many in finance as a store of wealth, but it also has numerous commercial applications, such as in electronics and jewelry. While gold is still being mined in various locations around the world, stores of the precious metal remain limited, with demand often sending prices up in response to the short supply.
By comparison, cryptocurrencies are purely digital assets that typically rely on blockchain technologies to track and uniquely identify individual units. Many of the more popular cryptocurrencies are “mined” in a digital fashion, helping to keep the supply limited. Often, these currencies can be used anonymously and are sometimes utilized to make payments over the internet directly between users—without the involvement of a third-party financial institution.
Many cryptocurrencies have been promoted as safe-haven assets by those with a favorable view of the technology. This, however, has not been supported by recent history. While many cryptocurrencies have seen a precipitous rise in price in the past, causing an influx of attention, they have also seen stark drops in price as well. Some cryptocurrencies have seen their price fall practically to zero through these drops, and even the most well-known of these assets have seen losses of 75 percent or more in a short period.
Gold, by contrast, has not traditionally experienced these drastic up-and-down movements in price. While the price of the commodity does vary, it has generally trended upward over time. In fact, since the year 2000, gold has seen its price per ounce increase by more than 350 percent. This strong track record showcases how gold has historically performed well over long stretches.
Another important consideration of an asset such as gold or cryptocurrency is how well it performs when other financial assets, such as stocks, are doing poorly. When an asset performs well in such a situation, it is known as a safe-haven asset since it can help protect wealth while markets are performing poorly. This characteristic has been a famous attribute of gold for a long time. For instance, during the financial crisis of 2008, when many stocks were bottoming out, gold made gains, helping to protect those with gold holdings from the worst of the downturn.
By comparison, cryptocurrencies have not shown a similar ability to hold their price or appreciate during times of market turbulence. These assets have instead shown that they can be prone to intense swings of volatility during times of uncertainty. While volatility can seem nice when an asset’s price is shooting upwards, it can be devastating to one’s wealth when a steep drop occurs. This is one of the reasons that government-issued gold coins, such as those offered by U.S. Money Reserve, can be a better way to protect your wealth than uncertain and unpredictable cryptocurrencies.
Safety and Regulations
Another knock against cryptocurrencies is the lack of regulations surrounding the technology. Though some consider the technology as financial assets, these currencies are not currently subject to the same rules and regulations as other assets. As such, stories abound of cryptocurrency users being scammed out of vast sums of money by other users. Even some exchanges, repositories for users to trade and store cryptocurrencies, have had instances of security breaches, causing losses in the hundreds of millions.
In contrast, gold is highly regulated with specific protections put in place for those who buy and sell the precious metal. This helps protect consumers from price manipulations or other negative outcomes associated with unregulated markets. Once again, this is another example of how wealth can be better protected through the purchase of gold coins rather than through the purchase of cryptocurrencies.
While cryptocurrencies have indeed become a topic of much discussion in financial circles today, this area of technology is still showing that it has weaknesses when compared to other assets. Though the purchase of gold coins from a company like U.S. Money Reserve can be a reliable store of wealth, cryptocurrencies have yet to show a conclusive ability to be the same. Those interested in a comparison between the two assets would do well to follow the markets and see how the prices of each stack up over time.
About the Company
U.S. Money Reserve is a supplier of government-issued gold coins based in Austin, Texas. The company has become known for its highly skilled team of account executives who work with clients to determine needs based on individual portfolios. This level of skill stems, in part, from the influence of the company’s president, Philip N. Diehl. Diehl is a former director of the U.S. Mint and now helps steer company policy through his knowledge of both personal financial freedom and public policy. That commitment to knowledge-based customer service has helped earn the company an AAA rating from the Business Consumer Alliance.
Follow U.S. Money Reserve on Twitter