Bitcoin or gold — what will be your golden investment option for you this Diwali? The traditional hedge fund against the volatile stock market or the new-age cryptocurrency with never-seen before returns, Indian investors have a mega puzzle to solve to park their hard-earned money during the auspicious occasion this time.
Gold has always been considered a safe-haven metal for Indian middle class. From wearing it as jewellery on occasions to storing it as an asset for upcoming generations in lockers, the yellow metal has also been a go-to option for many Indian. There has been a long-standing tradition of buying gold coins and jewelleries during auspicious festivals like Akshaya Tritiya and Dhanteras. But when it comes to investment option, can gold outshine other assets, especially the new age cryptocurrencies?
Cryptocurrency gained momentum especially among the millennial in the recent past, thanks to heavy returns and easy investments. In more than decade time, cryptocoins has seized the the financial world by storm. Last month, Bitcoin prices rose to a brand new record, breaking through the previous all-time high set earlier this year. Around 1.5 crore Indians have embraced crypto and invested close to 10 billion dollars in crypto assets. The financial markets across the globe took the burnt of Covid-19 pandemic last year but cryptocurrency market sailed through with its glitz and glory. “Bitcoin was amongst the largest growing asset classes during the recovery period of Covid-19. The return from cryptocurrency was double the returns of gold over the same period,” said Edul Patel, CEO & co-founder of Mudrex, a global erypto investment platform.
Many Indians families wait for the festivals like Diwali to purchase golds as it is considered auspicious. The limited supply and high demand of yellow metal ensure that gold remained a safe asset against inflation. However, recently, there has been a massive shift in the mentality of Indians to invest and diversify across
asset classes. From an investor’s point of view, Nischal Shetty, founder, WazirX, noted, “If we keep the religious and auspicious aspects of gold aside, a new challenger to it as an asset class has emerged rapidly in the form of crypto and Bitcoin, which are being seen as new gold, or the digital gold of today. Crypto has the ability to emerge as the new investment option in the festival season to fund the future. This can be attributed to people looking for alternative sources of investment, growing Internet penetration and people losing faith in the traditional financial ecosystem. People are now perceiving crypto as an alternative to traditional investment mediums.”
The easy investment and storage option gave cryptocurrency an edge over India’s favourite yellow metal, believed experts. One can store Bitcoin in digital wallet and can use them for purchasing various things in the market. Many well-known platforms across the worlds have already started accepting payments in Bitcoins or in any other form of cryptocurrencies.
“Physical gold needs to be stored properly. That poses a problem in itself. Bitcoin, on the other hand, is a digital asset and does not need any overhead for storage. Investing in Bitcoin is in fact much easier compared to gold, and it is pretty easy to start investing in Bitcoin. On the other hand, gold requires decent capital to even begin with. The capital appreciation on gold is pretty low. We all know how Bitcoin blows out all other asset classes in terms of capital appreciation,” Patel further mentioned.
Gold or Bitcoin: Tips for New Investors in Diwali 2021
Commenting on investment during the auspicious occasion of Diwali, Nischal Shetty, Wazir X founder said, “Some of the leading cryptos like Bitcoin, is often compared to digital gold by many crypto prominents although gold has a virtue to be centennially recognised and accepted both as a ‘store of value’ and a medium of exchange. Hence it is prudent to say that crypto can be considered as the best option for investments.”
Most analysts suggested adding Bitcoin in your portfolio for diversification and hefty returns. “Diversification is the key to building wealth in the long run, as it allows one to deal with the ups and downs of the market. Bitcoin as an addition to your portfolio provides a much-needed boost in generating returns. This boost, in addition to the natural hedge against inflation, adds brownie points to bitcoin. The choice does not have to be Bitcoin versus gold, but it can be Bitcoin and gold. Therefore, this Diwali, we can consider adding bitcoin and some other top cryptocurrencies to our portfolio.
For new investors entering the market during Diwali, Kanika Agarrwal, co-founder of Upside AI said, “The idea of Dhanteras is to invest. The focus should be on investing in an asset that will generate long term wealth for you. We buy gold because it is safe asset – hedge against inflation, currency and macroeconomic risk. It is negatively correlated to equities and therefore serves as your safety net. Bitcoin’s long term promise (among other things) is to do what gold does. Therefore, your decision on gold vs bitcoin should be based on how long term your vision is, how willing you are to take short term pain and what your asset composition looks like.”
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