Bitcoin or Gold: Which is a safe haven option?

Today, our primary focus will be observing both sides of the gold or bitcoin debate. But, in the end, you should get insights into what seems like the best option for you based on your needs and priorities.

GOLD

Gold has been a valuable investment tool for centuries. There are three main reasons to invest in gold in today’s world: it is scarce, valuable, and does not rust or tarnish. Gold is scarce because the Earth’s crust only contains about 50 parts per trillion of the metal. This scarcity makes gold valuable as investors know that supply will never exceed demand due to its finite nature. Gold also does not corrode or tarnish which means that even if stocks plummet and investments lose value, your gold will still be worth something down the line!

-LONGEVITY

Gold has been used for business transactions since the beginning of time. In fact, many countries use gold as a method to regulate their currency’s value. Gold is also an excellent investment option because it does not lose its worth over long periods and can be easily exchanged in almost any country. With millions upon millions of ounces mined every year, it is no wonder that gold has been a popular choice for business transactions over the years.

-SAFETY 

If your gold is stored in a metals IRA, its storage would be in a safe vault carefully overseen by one who will manage your account. In addition, these accounts are usually insured to a certain amount, much like a local bank account, so you can relax knowing your investment is safe.

-Can it be used as a currency?

In unexpected events like an economic crisis where local currency is no longer viable, gold can be used in its place as a currency. However, currently gold is not a viable means of buying things. While some gold coins are recognized as currency, the gold value is often worth more than the face value. 

BITCOIN

-VOLATILE NATURE

As an emerging investment, it’s highly volatile, meaning its susceptibility to significant price fluctuations in a short period is on the high side. Any volatile investment has every potential to return richly and can crash just as heavily.

-SAFETY

It is good to know that while bitcoin is entirely digital, you would still need a place to store it, whether on a mobile wallet or web platform. There are benefits and setbacks to each storage option. For example, web-based wallets are prone to be hacked, and your bitcoins could get stolen.

-Can it be used as a currency?

A mobile wallet app allows you to pay with bitcoin, as long as you have one. Bitcoin, as it is, can also be used as a digital currency to purchase goods. There are certain limitations on what you can buy with the cryptocurrency, but it’s still an interesting idea that may help popularize virtual currencies more broadly. While it’s true that each bitcoin carries within itself some information about who “owns” it, this is not particularly different from how dollars work.

Bitcoin or Gold: Our Verdict

If you’re pondering which asset to choose, bitcoin or gold, it all depends on your investment goals. The bitcoin case is speculative, given that its utility isn’t much yet. Because of bitcoin volatility, investors may want to have an entry and strategy exit if the price fluctuations are a risk. It’s also essential to consider the known merits of gold. Because of gold’s less volatile nature, it can be considered a price-stable asset, and unless you decide to change strategy on your investment plan, you need not transact with it. As we gradually approach a cashless society and digital currencies prevalence becomes stable, it will be essential to consider whether a new asset class like bitcoin is worth the investment.

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Sand Dollar is the first central bank-backed digital currency to be launched and may pave the way for others in the Caribbean to follow suit. The Bahamas, the tiny Caribbean island nation, has officially launched its national digital currency, the Sand Dollar, backed by the Central Bank of the Bahamas.

It is the first of its kind in the world and is a digital version of the Bahamian dollar and was announced via social media.

In a Facebook and Twitter post on October 20, the financial authority of the island said that its digital dollar is now available nationwide after being successfully tested on the remote islands of Exuma and Abaco.

Residents of the island nation can now trade the Central Bank Digital Currency (CBDC) with any merchant that is equipped “with a Central Bank approved e-wallet on their mobile device” with negligible transaction fees of $5, according to the Sand Dollar website.

The state-backed digital currency ‘Sand Dollar’ is available nationwide

The money in circulation will be limited to $48,000 initially. The Central Bank will mint more CBDC depending on the demand of the currency. The aim is to ultimately remove the physical Bahamian dollar out of circulation to prevent any inflation in the economy.

The Central Bank has selected NZIA Limited as the preferred technology solutions provider to implement the digital fiat currency system.

The digital wallets will be secured with multi-factor authentication security and will be mobile-based, servicing 90% of the population with smartphones.

The CBDC aims to promote greater financial inclusion throughout the Caribbean region compromising of more than 700 islands.

Project Sand Dollar was started in June 2018 to include the smaller and remote islands in the region that are cut off from any financial development or access to any banking services.

In 2019, the bank launched a pilot program issuing 48,000 Sand Dollars on the islands of Exuma and Abaco.

“Many residents in those more remote islands do not have access to digital payment infrastructure or banking infrastructure. We had to adapt the effort and solutions as a sovereign nation,” Shaozhen Chen, Assistant Manager of the Central Bank of the Bahamas said, adding that the digital currency would help provide “access to digital payment infrastructure or banking infrastructure” for underbanked and unbanked residents.

According to the Central Bank, the CBDC would “allow for reduced service delivery costs, increased transactional efficiency, and an improved overall level of financial inclusion.”

The per capita income in the Bahamas is one of the highest in the Americas, with a 90% penetration for mobile devices. The total GDP of the Bahamas was around $12 B in 2018. So it is a fertile ground to launch a digital currency. The Sand Dollar is backed 1:1 to the Bahamian dollar (BSD), which, in turn, is pegged to the U.S. dollar. Hence, this can be seen as a pilot release of a digital USD by proxy.

The ‘Sand Dollar’ is not a pioneer in digital currency in the region though it might be the first to be officially launched. There are a growing number of digital currency projects backed by financial institutions in the Caribbean region.

The Eastern Caribbean Central Bank (ECCB) launched its own digital currency project in 2019 named the DXCDCaribe pilot. The D representing digital was added to the international currency code (XCD) of the Eastern Caribbean dollar. The currency was called DCash. The currency was issued by ECCB and distributed by licensed banks and institutes in the region.

China is also testing a digital yuan, which according to reports has been already used in transactions worth over $160 million.

Cambodia too is planning to release a cryptocurrency named Bakong in the coming months.

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The kind of digital currency which will be neutral for the entire country will be called “Ekrona”. This new-age Sweden currency will supposedly change the face of business in the entire nation. The idea of switching to digital currency from hard cash is due to a noticeable decline in domestic cash use.

Thought behind the national digital currency

Riksbank was also the first bank in the world to issue paper banknotes in the 1660s. It won’t be wrong to say that it started the trend of paper currency on a global scale. The latest idea of this bank is to launch a project which will examine how a central bank-supported digital currency would work and the challenges it would impose. The final decision about the introduction of national digital currency will be taken within the next two years.

Cecilia Skingsley, the deputy governor at Riksbank, believes that this project is as revolutionary as the launch of paper notes. The nature of this currency is not ascertained yet. Swedish experts assume that this project will be good for the monetary policy and financial stability of the nation. Although, the bank is still perplexed about the fact that the digital currency should be a rechargeable card, or an app, or in any other form.

Like other central banks, even Riksbank has been providing electronic money in collaboration with bank accounts and other such organizations. But no other bank has ventured into finding a way to generalize digital money and make it acceptable on a national scale. Another key point to note is that the bank aims to complement hard cash with digital currency, but not replace it.

What led to this project

Sweden has observed in the past couple of years that there has been a dramatic drop in cash usage. The amount of circulated notes and coins has dropped by 40% since 2009. This is as a result of the increase in online shopping and card payments. Such a phenomenon instigated Riksbank to come up with a new way of issuing money across the country.

This would be the first time in the world when a bank will provide customers direct access to the issued virtual money. As this project is in its initial stages, the bank is weighing various aspects. Issues like delivery method, traceability, and interest on e-money are some of the major ones. Digital currency is advantageous as it cuts down the cost of banking. At the same time, it speeds up the process.

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Forget about dollars, euros, and pounds! Get ready for the digital era, for now you will be able to use virtual money to pay in a couple downtown Las Vegas casinos. The Golden Gate and the D casino have disclosed that customers are now free to use Bitcoin digital currency to stay at their hotels. D’s will take digital cash at its gift shop and restaurants as well. However, both casinos will not accept the virtual money for gambling.

Wait, what?

Bitcoin is a digital currency and a peer-to-peer payment system launched as open source software in 2009 by Satoshi Nakamoto. Bitcoin digital currency is best known as cryptocrurrency, since it uses cryptography to manage the creation and transfer of currency. Users send payments by transmitting digital signed messages to the network. Participants, identified as miners, confirm and timestamp transactions into a shared public record named the block chain, for which they are rewarded with new bitcoins and transaction fees.

Bitcoin has expanded exponentially over 2013. Even though it has been around since 2009, it did not get popularity until 2011, when it was worth $2 per con. By last year, Bitcoin digital currency had jumped to $20 per coin, and then climbed to $266 last April. Later, within the last couple months, it had a further price upgrade and now is hovering around $1,000.

The currency of the future?

Bitcoin digital currency has grown in acceptance in the past months. Some analysts believe that the digital cash could become the currency of the future. According to a research report by Bank of America disclosed last month, the decentralized digital currency could be considered a major contender to other kinds of online money-transfer providers.

In addition, the digital cash has also gained popularity in online marketplaces and with retailers. The gaming firm Zynga began testing Bitcoin payments for a few online games earlier this month. Also, the Sacramento Kings became the first professional sports team to accept the virtual money to process payments for tickets and team merchandise. This week it was unveiled that eBay will also introduce Bitcoin sales under a “virtual currency” category on its United Kingdom and United States’ sites.

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