How to Use Bitcoin to Invest in Gold
Gold and bitcoin enjoy a curious relationship. On the one hand, there is a significant crossover between investors in both, particularly from libertarians who don’t trust the U.S. dollar. But on the other hand, initiatives such as #DropGold have sought to position bitcoin as a more portable, divisible and scarcer form of gold. Can bitcoin and gold co-exist, or does the supremacy of the one threaten the other?
Bitcoin and Gold – Allies or Enemies?
Lately, bitcoin vs. gold has been presented as a zero sum game in which only one asset can thrive at the expense of the other. Grayscale Investments, creators of the “Drop gold. Buy bitcoin!” campaign, make it clear where their loyalties lie. “It’s not that gold is bad. It’s just that bitcoin is better,” they venture. This is is a matter of some debate, especially given that bitcoin’s utility as a gold-like store of value is fiercely contested within the cryptocurrency community.
Fortunately, you don’t need to plant your flag in either camp to benefit from exposure to both assets. Whether you believe bitcoin is best suited as a store of value or medium of exchange is immaterial. Likewise, whether you believe gold is a safe haven uncorrelated with global currencies, or a more trusted alternative to bitcoin, backed as it is by thousands of years of reputation, makes little difference. Provided you see value in both, there’s benefits to acquiring both, ideally without needing to convert to fiat along the way.Peter Schiff
Renowned stockbroker and libertarian Peter Schiff enables investors to purchase gold and silver using BCH and BTC, via Schiffgold.com, and to take physical delivery of it. Buying precious metals doesn’t have to necessitate assuming custody of course – in fact in most cases it doesn’t. Yield-bearing crypto company Kinesis has initiated an EU and U.K.-wide debit card program with Contis Group, using real assets of gold and silver as the basis for digital currencies, which have a 1:1 allocation with physical bullion, essentially making gold spendable.
Another way of obtaining exposure to gold without ever setting eyes on an ingot is through Currency.com, which enables tokenized commodities to be traded including spot gold, at up to 100X leverage, using BTC or ETH. Like bitcoin, gold can assume many forms for investors, with derivatives, synthetic products, and third party custody taking precedence over non-custodial solutions. There’s the Digix gold token (DGT), for instance, tradable on various cryptocurrency exchanges, each unit of which represents one gram of gold.Gold market on Currency.com
Bitcoin and Gold Share Many Similarities
From an investment perspective, you don’t have to ascribe to the Store of Value thesis for bitcoin – or gold – to see it as a worthy long-term hold. One reason why both assets are attractive as part of a well-rounded investment portfolio is because they can increase its Sharpe Ratio. Investing in assets that have low correlation to one another can enhance a portfolio’s risk-adjusted return. While not immune from global economic downturn, bitcoin and gold have shown remarkable resilience to events that have dampened the world’s economy.
The beauty of each asset is that it can be many things to many people, and thus everyone has their own reasons for acquiring gold or bitcoin. Whether you favor gold for its beauty, its scarcity, or its intrinsic value is your prerogative. It’s the same with bitcoin, which can be locked away in a hardware wallet or used to purchase everyday goods and services. If you’ve got the means, you don’t have to drop gold to buy bitcoin or vice-versa – you can have both.
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