Gold, which has maintained a consistently steady price over recent years, has historically been considered a safe investment. It’s a reliable hedge against inflation, the supply constraints boost its value as a commodity, and it retains its value in spite of financial and geopolitical uncertainty. For these reasons, and more, gold has developed a reputation as a universal store of value across the globe and a safe investment for any portfolio.
However, in recent years many gold investors have set their focus on another asset class which has been demonstrating strong ROI: cryptocurrencies. Consider the data: over the past 30 years, the price of gold grew by 335%, while in 2017 alone, Bitcoin grew over 1300%. While cryptocurrency is a far newer frontier, it shares many similar characteristics with gold and should be seriously considered for those looking to diversify their retirement assets. Here are a few reasons why.
Hedge Against Inflation
The price of gold tends to rise when the cost of living increases, making it a strong hedge against inflation. Cryptocurrencies, although newer to the game, have demonstrated that they, too, are a hedge against inflation. Bitcoin is not backed by a government entity, and the price is not impacted by stock market volatility. Furthermore, the finite supply of 21 million Bitcoins ensure they cannot be counterfeited or manufactured.
Hedge Against Global Uncertainty
In recent years, Bitcoin has proven to be a valuable asset all over the world in times of global turmoil. The Bitcoin price spiked in 2013 following the European debt crisis, as well as in 2016 when Britain decided to leave the European Union. Meanwhile, today in South America, countries such as Venezuela and Bolivia are combating hyperinflation andeconomic uncertainty by using digital currencies to pay for such day-to-day items as food and travel.
While gold has also been a safe investment in times of global unrest, its price has remained largely static over the last several years, while Bitcoin keeps reaching new all-time highs. Bitcoin’s price increase is not expected to slow down anytime soon: in fact, Fundstrat’s Tom Lee predicts that Bitcoin will reach a new price record by July 2018.
A Renowned Technology
Bitcoin is powered by the blockchain, a decentralized digital ledger that provides a public record of all financial transactions. What does this mean? Bitcoin is more than just an alternative payment system - it’s a renowned technology that’s setting the standard for processing data transactions with greater transparency and security. Blockchain technology is being incorporated into business models that span beyond the financial sector and into fields as diverse and varied healthcare, technology, and law. The cryptocurrency space is constantly evolving with new iterations and adaptations, making it an exciting and dynamic arena to invest in, with the potential for enormous profit.
A successful investment portfolio is a diverse investment portfolio. Gold will always remain a stable and valuable asset, but for those looking to diversify and gain tremendous ROI, cryptocurrencies already have, and will, continue to demonstrate their immense value.
2018 and Beyond
2017 saw an explosion in Bitcoin interest from investors of all kinds. As the cryptocurrency continues to gain in popularity in the coming years it will continue to see explosive growth and expansion due to its decreasing supply, portable store of value, and immutable security. Even though the entire industry is still in its infancy, investors looking to add Bitcoin to their retirement portfolio will continue to be pleased with the core principles of Bitcoin that make it a sound investment to store value for the long-term.
Chris Kline is co-founder and COO at BitcoinIRA.com, responsible for all aspects of the company’s operations and partnerships.