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Old 01-11-2017, 05:52
FXBtrading FXBtrading is offline
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Cryptocurrencies and gold: You need to take a position

Any trader looking to make money on the markets needs to invest time researching before taking a position.

If you do a search on cryptocurrencies it wonít be long before youíll see an article that compares their merits against gold.

Should you invest your hard-earned money in gold or cryptocurrencies? They ask, and variations on that theme.

The number of these articles implies that they are somehow in competition with each other.

But itís a phoney war, as they both have a different role to play in the world of finance and in your portfolio.

One of the reasons gold has stood the test of time is the stability it offers against the unpredictability of currencies and the sudden collapses that have taken place throughout history that can wipe out fortunes in an instant.

Gold is the perfect way to hedge against risk, impervious to natural, financial or political disasters.

Cryptocurrencies also offer a viable alternative to traditional currencies because they are decentralised, meaning no central authority can take it away from you.

But they differ in tangibility. Gold has been around forever and relied upon for centuries. Cryptocurrencies have no history, they are so new people are still waking up to them and their possibilities.

The sense of value that comes in physically holding gold canít be replicated by cryptocurrencies. They donít Ďfeelí as safe as gold because they rely on an internet connection, they canít be seen, they canít be held.

But in reality, very few people reading this will have actually bought anything with gold. The likelihood is that most never will, but there is a strong possibility that some will make a transaction with a form of cryptocurrency in the future.

Their full role or use hasnít been fully explored or understood which has led to sceptics expressing caution. This month Ray Dalio of Bridgewater Associates gave an interview to CNBC where he expressed his concern that Bitcoin (one of the leading cryptocurrencies) is a speculative market that was a bubble.

JPMorgan chief Jamie Dimon went even further, describing it as a fraud and warning that heíd fire any trader he caught buying or selling it.

But Bitcoin and other cryptocurrencies are necessary because people are losing trust in money, and while gold offers the sense of security people are looking for it lacks genuine usability.

And, if central banks start to invest in Bitcoin and other digital currencies it will increase their legitimacy to a wider number people in a short period of time.

Gold will be around for the next hundred years and beyond. However, itís difficult to predict how long cryptocurrencies will be around. So, as a store of value, gold holds sway.

But goldís value wonít increase dramatically in the next 2-3 years or beyond. Cryptocurrencies have and will continue to gain value.

So rather than seeing gold and cryptocurrencies as an either/or situation, it makes more sense to find a place for both in your portfolio when you trade them on FXB Trading and focus on finding a balance between the level personal goals and exposure and the level of acceptable risk.

They both provide a great opportunity to enhance your earning potential.
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