When it comes to hedging against financial volatility, consumers and investors tend to flock to three different types of assets. First of all, there is cash, which is the preferred option for consumers. Additionally, gold presents a welcome alternative as well. Some people even decide to get involved in bitcoin. Let’s take a look at how these three tools compare to one another in terms of financial duress.
3. Cash Has Its Merit
If something were to happen to the banking system, the last place anybody should store their money is in a bank account. Even though most people use a bank card to pay for goods and services, there is something about cash that makes consumers feel empowered. After all, with cash, the consumer controls their own funds, rather than asking the bank for permission to access their wealth.
Albeit some people may argue cash can be less user-friendly compared to payment cards, there will always be a place for paper money and metal coins in our society. Going cashless will only empower banks even more, which is the last thing our society needs right now. Unfortunately, storing large amounts of cash at home or in a location that is not a bank can prove to be quite problematic. Cash is a useful tool to remain anonymous and in control of one’s finances, but it has its drawbacks as well.
2. Gold’s Popularity is Waning
In times of financial turmoil, gold is always considered to be the safe-haven asset. Mainly investors will buy amounts of gold – and other precious metals – to hedge against fiat currency volatility. For example, the gold price shot up once Donald Trump was elected to be the next US President. Many people feared for the US economy, yet events unfolded in a rather anticlimactic manner. That does not mean gold is no longer a viable investment, although it has lost some of its appeal as of late.
The main problem with gold as an investment vehicle is how consumers have no easy access to this resource. They will need to use a broker-dealer or a bank to buy gold, which adds another intermediary to the equation. Moreover, moving large amounts of gold is very difficult, unless this can be done in digital format. To most consumers, gold will never be a viable investment opportunity as it is not available in a convenient format.
1. Bitcoin Is An Interesting Alternative Option
A lot can be said about bitcoin, not in the least how it can be a rather volatile digital asset. While it is true that bitcoin’s price goes through ups and downs on a rather regular basis, things are not as bad as some people may think. It is true the value can shift drastically in a matter of minutes. Then again, bitcoin’s price usually recovers rather quickly as well.
Some people see bitcoin as the new safe-haven investment vehicle. Considering how the value per bitcoin surpassed the price per troy ounce of gold, there is some merit to that statement. Other people think bitcoin will not retain its value over time. Then again, bitcoin puts holders in full control of their money, it comes in digital format and can be used all over the world without going through a conversion process first. It combines the best of cash and gold while providing an open market and no restrictions imposed by banks or governments.
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