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Gold vs. bitcoin: what is the best investment in rising times?
Friday, April 5, 2024 - 18:30
Oro bitcoin. Foto: Unsplash.

As investors decide where to place their capital, the debate focuses on the stability of gold as Bitcoin's disruptive innovation marks a crucial moment in the evolution of the global financial market.

Over the past few days, both gold and the cryptocurrency bitcoin reached new all-time highs. The safe haven asset exceeded US$2,300 per ounce, while the digital asset exceeded US$70,000. Now, two weeks before the bitcoin halving -when the reward for mining a new block at the network will decrease by half- the question is once again as to whether it is wiser to invest in traditional or modern technology, that is,  gold or bitcoin.

As the United States Securities and Exchange Commission (SEC) approved bitcoin ETF listings at the New York Stock Exchange, the cryptocurrency's popularity fueled as a decentralized digital asset, especially among investors seeking to diversify their portfolios and protect themselves against the devaluation of fiat currencies, says Denise Cinelli, COO of CryptoMarket and Country Manager in Brazil.

Among them, indicates Jaime Aritio, commercial manager of Renta4 SAB, are institutional investors who showed their interest in allocating up to 5% of their capital to this new asset, according to surveys.  

“A moderate investment with a speculative profile,” he highlights, because the investment has a long-term focus (buy and hold) and also contrasts with retail investors, who are more active in the market.

The future launch of crypto cards in the region was announced recently. This will allow users to buy in any online store or business using their cryptocurrencies.

Read more in: Lulubit cryptocurrency exchange expands in Panama and Central America

For Cinelli, with the continued growth of the adoption and acceptance of bitcoin, along with the development of blockchain technology and the increase in institutional interest, the support of a long-term investment in bitcoin is demonstrated.

“However, when it comes down to it, bitcoin does not serve to cover inflation like gold does, nor does it serve as a dollar or euro to preserve capital and savings,” says Aritio. “Trying to replace the banking system with something ethereal and, in my opinion, romantic, I don't see that happening. “People really save in the bank.”

From the perspective of an investment bank, he adds, the qualitative narrative of the cryptocurrency that took off since 2007 during the global financial crisis as the technological innovation capable of replacing the fiduciary capacity of banking agents (“what banks don't want you to know”), is not taken seriously [by the banks] because they are unregulated companies and make up financial informality. The case of FTX comes to mind. Its founder and former CEO, Sam Bankman-Fried, was found guilty on seven counts of fraud and conspiracy arising from the collapse of the cryptocurrency exchange platform.

Read more in: Bankman-Fried sentenced to 25 years for multimillion-dollar fraud in FTX case

However, he highlights that the interesting thing about bitcoin is the blockchain --the underlying technology for the exchange of information. He assures that both central and commercial banks are beginning to adopt it because it is a giant database that exchanges information in real time in a precise way.

“Banks have already been working on tokenizing their distribution chain a little, and in the end what they are going to do is increase the level of traceability and security in all types of transactions,” said Aritio.

“Cryptocurrencies are liquid assets that can be bought, sold and traded in global markets 24 hours a day due to blockchain,” Cinelli agrees on the advantage of this technology. “On the other hand, it is more difficult to transport ounces of gold.”

“Now, they are different instruments. In both cases, investing in them, within a wide range of financial instruments, responds to characteristics beyond just profitability," explains Sergio Tricio, CEO of Patrimore, a fintech that works as a financial advisor.

Bitcoin has proven to be highly volatile, which can translate into significant profit opportunities, but it also has a higher risk of loss in the eyes of more conservative investors. On the other hand, although gold is beginning to decline after the solid data presented by the Fed, it is historically considered a safe haven in times of economic uncertainty, said Matías Díaz, investment analyst at the Chilean broker BeFX.

Díaz bases his forecast on data released earlier this week, which shows solid manufacturing activity in the United States. This has led investors to perceive the possibility of rate cuts by the Fed as increasingly distant, which, consequently, has caused the decline of a large part of the assets considered safe havens, including gold.

“Countries continue to acquire gold and would not necessarily be acquiring bitcoin,” summarizes Triclo.

Ultimately, the decision between these assets depends on factors including the investor's risk tolerance, its investment objectives, and the economic context. But it is undeniable that bitcoin has generated increasing interest amongst investors around the world.



Dax Canchari