My favorite time of the year is here. While there is a clear downside of putting on a lot of holiday weight, but the vibe of the town is just ethereal. Last year, around the same time, we were talking about buying gold and various formats to invest in it. This time around, I have something else in town. Yes you guessed it right. It’s the talk of the town, Bitcoin. But why invest in Bitcoin when gold is doing just fine? Why do I want Indians to ditch their beloved yellow metal for something completely digital? That’s what we are going to talk about today. 5 reasons you should ditch gold and buy bitcoin this Dhanteras.
Who Should Stick to Gold?
When it comes to gold globally, it is seen as a vehicle of investment. However, here in India, things are a little different. Investment is a by product of our love for gold. It has more to do with ornaments and jewelry it can be forged into. My father has accredited his gold savings for my successful marriage so many times now. So if you are a consumer, like him, instead of an investor, this blogpost isn’t for you.
You can’t even touch Bitcoin (completely digital), leave alone forging it into something. Instead if you for a store of value for your money, read on.
Why Should You Ditch Gold and Buy Bitcoin?
Now that you have chosen to go ahead, here are a few reasons to consider buying Bitcoin instead of physical gold. First off, let’s discuss some similarities between these two assets. Why do we consider replacing gold with Bitcoin at all? The answer to this question lies in the supply. You see the currency that we hold is an inflationary asset. That means it loses it’s value over time. Why? Because RBI can print as much as they want basis their discretion. I am not saying they would, but they can.
On the other hand, gold is limited. It is unlikely to find fresh gold reserves which would pump up the total supply. Therefore, with an increased demand, gold is bound to go up. If you are following us for a while, this shouldn’t come as a surprise that Bitcoin also has a restricted supply, capped at 21mn. How? Details here.
But the story does not end just here. Bitcoin can have an edge over the traditional physical gold. Let’s explore how:
Have you ever lost a valuable item? It’s fine. But have you ever lost gold? That’s when the hell falls on you. I once lost one of my rings temporarily (for about 15 days). Those 15 days were really tough (you have to experience it to know it). Ever since, I refrain from using gold for any ornamental purpose. As a result, I resorted to using digital gold if at all I wanted to hedge my risk. But then again, it is very difficult for an Indian family to digest the concept of having gold but not in physical form.
Bitcoin solves for all these problems. Now we have a real store of value which has appreciated more than any asset in the past decade. Unlike physical gold, it offers fractional buying (as low as Rs. 100 on some exchanges). Also, if you want, there is no cost involved in storing it. All you need is a digital wallet to take care of your holdings.
A couple of months ago, we went to exchange an older pair of my spouse’s bangles with a new one. The gold used to buy those bangles was sourced by my grandmother. However, when we tried to sell it, the dealer mentioned that since it doesn’t have a hallmark, it will be sold for a 5% lesser than usual.
You see, hallmark didn’t exist when my grandmother bought that gold. And now that it has come into existence, I am not sure how much of it would be implemented. One could always come up with a fake version of it leading to innocent investors losing out on their money.
Yet again, Bitcoin is there for your rescue. By the very design of the Bitcoin and blockchain technology backing it up, it is not possible to create your own version of it. Therefore, if you plan to invest in BTC, you won’t be scammed for sure.
Coming back to the story of bangles, we agreed for a 5% mark down. Later, he mentioned that when he would extract gold by melting those bangles, he would only get 92%-95% of it. The rest is lost in impurities. Apart from that, we also lost a decent sum on making charges. We aren’t getting anything for that.
In a nutshell, while my spouse was super happy, I don’t think it was a smart deal. This doesn’t happen with Bitcoin. I can sell 100% of it’s value with no loss whatsoever.
Not to forget about the fact that I had to go find a decent store that won’t dupe us and then make this transaction for those bangles. On the other hand, I can buy and sell Bitcoin at a click of a button using multiple exchanges.
D. Earning Interest:
Is there a way to earn interest on your physical gold? I am not sure. Let me know in the comments section below. The nearest we could get to earning interest on our gold possessions is through Sovereign Gold Bonds which give you a 2.5% APY. But they have a lock in period of 8 years.
However, there are ways to earn a decent interest on your BTC. There are exchanges like Vauld, that help you convert your holdings in a fixed deposit so that you can earn more bitcoin on the top of it. Secondly, you could also lend your BTC on platforms like Compound or AAVE to earn a passive income on it in the form of interest. Sweet.
Is Bitcoin too expensive? Has it already reached it’s maximum potential? Here’s some number crunching for you:
Gold’s market cap is currently at USD 8 Trillion. If you believe that BTC is a better store of value, over the years, it should command a similar market cap as well. In that case, 8Trillion/21Mn = 450K.
Currently BTC is trading at $60K. When was the last time you could make an 8x on your gold investment? But beware, BTC would have to stand against the test of time and hacks. It would surely be a great place to see.
Convinced already? Head to CoinDCX now to purchase your first Bitcoin now. Still got doubts?
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Until next time..
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