Investing for the Next Recession: Gold vs Cryptocurrency
The next recession is only a matter of when. Unfortunately, even though we know that recessions are inevitable, we can never predict when and how exactly they will strike. All that we do know is that the next one is coming, and it will take jobs, wealth and lives.
The key, then, is to always be ready for the next recession by having a smart investment plan. You do not need to be hoarding beans, bullets and gasoline, but there are easy ways to be prepared to ride out the next recession with your wealth intact.
The standard haven for wealth in times of crisis has always been gold. However, there is a new kid in the investment world, cryptocurrencies, who also have something to offer as a store of value in troubled times.
Let’s take a look at the advantages and disadvantages of both gold and cryptocurrency as a store of value during a recession.
It’s beautiful, it’s yellow, it’s soft and everyone loves it. Gold has been used as a store of value since the dawn of civilization, and it has been a major component of investment portfolios since the dawn of investing. It is also an excellent hedge for portfolios during times of uncertainty as prices of gold tend to do well when turmoil hits the markets like the 2008 financial crisis.
• Universal value: Everyone recognizes the value of gold. Whether you are in downtown New York or the Amazonian rainforest, you will be able to find someone who offers reasonable value for your gold.
• Historical price appreciation: The value of gold always goes up during a recession. You can count on your gold increasingly significantly in value, which will help to offset any losses from your other assets.
• Ease of use and storage: Unless you are a billionaire, you can store your entire net worth in gold in a small safe or bank box. Gold comes in all shapes and sizes, so it is easy enough to transact for what you need or to exchange your gold back when the recession passes.
The world of cryptocurrencies may be full of excitement and potential, but it is also full of uncertainties and unknowns. That said, there are some solid advantages that cryptocurrencies have as a store of value during a recession.
• Intangible: While gold may be easy to store and use, cryptocurrencies are even easier. All you need is a computer with access to the Internet, and you can safely use the value stored in your cryptocurrencies. This also means that you can make transactions anywhere in the world without the risk of carrying or transferring physical gold. However, cryptocurrencies are limited by this access to the Internet, whereas gold will work just fine in places without it.
• Unregulated: It may seem far-fetched to younger investors, but it was not that long ago that the personal possession of gold was outlawed in the United States. In troubled times, it is not unreasonable to expect that governments can seize or otherwise limit financial assets. Cryptocurrencies are ultimately just recordings on an electronic ledger, and they are safe from the grasping hands of governments and thieves.
• Unlimited potential: While gold may double in value during a downturn, the potential upside of cryptocurrencies is limitless. If they come into widespread use, which may be more likely during a serious global financial crisis, then the people who are already holding them stand to make a windfall as other people seek them out as a store of value and means of transaction.
Different Benefits in Different Circumstances
There is no clear winner when it comes to gold and cryptocurrency as a store of value in troubled times but both have their advantages over one another and is why it would be smart to diversify between the two, especially when talks of a recession start to circulate. While cryptocurrency is easy to save and spend in a digital world, cumbersome gold will still have value if things really go bad.
On the other hand, gold is an ancient form of exchange, while cryptocurrency may emerge from the next recession as the universal store of value and means of transaction.
While it is not recommended that you sell all your gold and buy cryptocurrencies instead, there is a case to be made for adding cryptocurrencies to portfolios as an alternate store of value.
Both cryptocurrency and gold have their advantages and disadvantages, but together they complement each other well, which is a bonus for your portfolio in an uncertain world.