Cryptocurrency vs gold: Should you invest in cryptocurrencies or gold? Experts comment

Cryptocurrency sceptics were put to shame in 2020 after bitcoin became one of the best performing financial assets of the year. However, digital currencies are not without risk and worry - with most subject to extreme price swings and fluctuations. Some people claim there is extreme potential to make incredible sums off these markets, while hardcore naysayers warn the crypto bubble is fit to burst. So should you invest in gold or cryptocurrencies?

The crypto market has been in a state of turbulence over the past week in the wake of damaging climate change accusations from SpaceX founder Elon Musk and threats of greater regulation from China.

This week prices across the board tumbled twice, both in response to reports of a crackdown from China.

The first dip took place after Chinese regulators decided to ban the country’s financial institutions and banks from providing services related to cryptocurrency transactions.

The second drop happened yesterday after Chinese vice-premier Liu He reiterated plans about the country’s intention to impose a crackdown on bitcoin mining and trading.

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According to tracking website CoinMarketCap, at the time of writing, the global market cap has dropped 8.7 percent over the past day.

In terms of individual currency values, ethereum has fallen the most in the past seven days, dropping 38.93 percent.

By comparison, bitcoin has fallen 20.93 percent, dogecoin by 33.97 percent and cardano by 35.35 percent.

Despite bitcoin’s performance dropping, it appears to be showing signs of buoyancy in the wake of Mr Musk’s endorsement of the coin and crypto market generally on Saturday.

Despite these fluctuations in the prices of cryptocurrencies, they have been generally growing in popularity in recent years.

Many investors see them as a key investment for innovative investors.

However, the ever-volatile crypto market has seen massive drops of more than 30 percent in a single day which can be daunting for investors.

Analysts at Societe Generale have spoken out about the proposition and whether it is worth investing in gold or cryptocurrencies.

Analysts at Societe Generale have spoken out against cryptocurrency, claiming its volatility makes it a risky bet.

The bank argued gold’s place in one’s portfolio is better understood and has a stabilising impact.

The metal can partially offset capital losses on bonds in the event of rising inflation, and, in cases of runaway inflation or a return to deflation, the metal has a protective role in partially offsetting losses on equities.

In a recent note, Societe Generale’s Alain Bokobza and Arthur Van Slooten wrote: “It comes as no surprise that the place of Bitcoin in any investment portfolio remains highly contested, precisely because of its erratic price movement.”

The pair argued the risk of bitcoin “remain on the downside”, citing future impact such as potential regulation which could be its “biggest threat” for future investors.

The analysts also addressed environmental concerns, “confusing Tesla communications, past stratospheric price movements, potential new regulations from central banks on cryptocurrencies” as interfering influences which could make or break success within the crypto market.

Given this difficult week, the viability of investment in cryptocurrencies has dampened.

But celebrity endorsement and other social changes could see an upswing in trends, forecasts, projections and prices - especially given the volatility of the sector.

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