Cryptocurrency Is The Alternative To Gold This Dhanteras And Diwali
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For centuries, gold has been exalted as the ultimate store of value and in India, many buy gold because of this perception, especially during Dhanteras and Diwali. But in recent times, gold seems to be losing its sheen as a wealth creator. Cryptocurrencies, such as Bitcoin, have emerged as a strong contender and gold alternative, especially because of the actual returns they have delivered to investors. In fact, investing and buying crypto assets may well be a superior investment opportunity that could outpace inflation far better than gold.
Upending the Long-Standing Lure of Gold
Gold is no longer seen as the ultimate investment not just because of diminishing value alone. Several other factors have also contributed. Heightened turmoil in financial markets, apparent signs of developing hyperinflation, impending sovereign debt collapse in some economies, are all causing investors to seek different asset classes.
As an excellent example of a new alternative, cryptocurrency based on blockchain technology leans towards a contrarian economic theory. Cryptocurrency is an exchange of value not structured or retained by any government but rather established on computational features of durability and clarity that hold the potential of dislodging post-World War II fiat monetary systems.
Why Crypto is the New Gold
Crypto may be a better store of value than a traditional currency. In a way, it is like gold in a digital avatar. Given its limited supply and free from governments or the hold of traditional banking systems, cryptocurrency can give investors an excellent hedge against inflation as compared to gold.
Take the price charts of gold that reveal how it performed during periods of high historical inflation. In the 1970s, when inflation rose, gold futures languished. They only caught up with rising prices in the last year or two of the 1970s. And the facts regarding gold’s so-called superiority as an inflation hedge are even more dramatic. For example, consumer prices have risen the highest since 2008. In contrast, gold prices were down by 11%. But cryptocurrencies such as Bitcoin grew approximately 40% in value in 2021 despite a recent crash. And then there’s Bitcoin’s spectacular rise that has outrun every other conventional asset by a huge margin, delivering an annualized return of 230% over ten years compared to gold’s average return of 12 to 14%.
One similarity between cryptocurrency and gold is that supply of both is limited. Just like gold will become hard to excavate as time goes by, cryptocurrency will be increasingly difficult to mine. But the advantages presented by digital cryptocurrency vis-à-vis physical gold are many. It saves you the bother of storing, the cost of accessing and securing the asset, which is a problem traditionally experienced with gold.
A New Asset Class for Diversification
With widespread adoption, cryptocurrency could emerge as an inflation-proof investment and store value. Take, for instance, how large institutional investors seeking long-term stability and growth are eagerly buying cryptocurrencies, thus giving it the status of a stable asset with a long-term horizon.
Cryptocurrency also provides potential hedging benefits, provided you construct your portfolio in a way that meets your financial goals within your intended time horizon. If you're looking to invite Goddess Lakshmi into your home this Dhanteras, think about adding crypto as an asset instead of gold and benefit from diversification.
What Crypto Market Capitalisation Means to You?
For most investors, market capitalization is an indispensable factor.
However, it's not quite the same for crypto investors. For instance, crypto market capitalization means a total value of a cryptocurrency. It is calculated by multiplying the cryptocurrency's price with the number of coins circulating. For instance, to know the market capitalization of Bitcoin, you need to multiply the current number of coins existing, which is over 18 million currently, with the price of Bitcoin at a given time. When its price fluctuates, so will market capitalization. In recent weeks, Bitcoin has floated around $45,000-$55,000. To understand its range in market capitalization:
· $45,000 x 18.8 million = $846 billion
· $50,000 x 18.8 million = $940 billion
· $55,000 x 18.8 million = $1.034 trillion
Similarly, if you were to stack up Ethereum against Bitcoin in market capitalization, here's how it would go: Ethereum, with a current market capitalization of about $351 billion is calculated at $3000 with 117 million Ethereum coins in circulation.
Currently, the total market capitalization of all cryptocurrencies is near $2 trillion, and it surged by more than 150% in 2021.
Understanding the market capitalization of cryptocurrency is important if you are seeking the potential of a specific token. However, it need not be a decisive factor when investing as it is very different from the stock market. When analysing cryptocurrency investments, consider its data, use cases, developer activity and the team behind the project.
The thought that cryptocurrencies could rise in just a decade from a baffling, almost sci-fi fantasy to an actual gold alternative shows just how far cryptocurrency has come. If it sounds like a fairy-tale, keep in mind the mystical Dhanteras legend. Invite Goddess Lakshmi this Diwali by buying crypto-assets and your investment may well rise along an upward trajectory well through the next decade and beyond.