January 1, 2021

Bitcoin or gold – Which is the better investment for 2021?

January 1, 2021

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Bitcoin or gold – Which is the better investment for 2021?

It goes without saying that both gold and Bitcoin have had a stellar performance in 2020, regardless of a couple of dramatic ups and downs. In this article we will check out the differences and advantages these two assets have to offer to see how they measure up in terms of risk, volatility and profit potential.

2020 performance comparison 

Looking at how these two assets fared in 2020, it’s obvious that Bitcoin holders and traders definitely had the opportunity to come ahead as Bitcoin enjoyed an extraordinary rise of more than 300%. This resulted in crypto grabbing the spotlight once again, and – if it wasn’t already – Bitcoin is now on the radar of every trader and major financial institution across the world.

Gold, of course, also enjoyed its own rally over the pandemic and as the quintessential safe-haven commodity, it managed to create a new all-time high near $2,060 after breaking past the major psychological barrier at $2,000 in August.

With renewed dollar strength, however, the momentum in gold has started to wane in 2021 and is now trading near $1,841. On the other hand, Bitcoin has managed to pick up steam in the first few days of January 2021, hitting its new all-time-high on January 8 at $41,940.

Market capitalization 

Despite of Bitcoin’s relative infancy, especially when compared to one of the world’s oldest and most stable commodities such as gold, it’s rapid growth and market capitalization is nothing short of impressive. When Bitcoin peaked on Jan 8, its market cap reached $758.63 billion according to statista.com.

Obviously, this is a far cry from gold’s $10 trillion, but with renewed interest cryptocurrencies and major institutions driving adoption, we could potentially see Bitcoin hit the $1 trillion mark sooner rather than later.

Regulation, safety and volatility 

While cryptocurrencies are generally decentralized and largely unregulated, traders – as opposed to actual Bitcoin investors – shouldn’t put too much stock in hacking and money-laundering fears. This is because speculation on the value of Bitcoin, or other digital coins for that matter doesn’t involve buying or holding crypto in an online wallet.

In fact, retail traders would likely welcome such disruptive events due to the unavoidable dramatic fluctuations in price and heightened volatility they will trigger in the market.

As you may already know, online trading greatly benefits from price fluctuations and volatility and cryptocurrencies are some of the most volatile assets you can find across the financial markets.

Gold is much more limited in terms of volatility, however, its strengths lie elsewhere, namely to its growth potential during times of economic crisis.

Therefore, regardless if you are interested in trading gold or Bitcoin online through a trading platform, you will find that the benefits and security are not unlike trading any other asset albeit with potentially different trading conditions.

For example, CM Trading offers 100:1 leverage on precious metals such as gold and silver, while Bitcoin is limited to 5:1. It’s important to note here that high leverage carries higher risk exposure and therefore, you should always ensure that you are trading with a solid risk management strategy in mind.

Market liquidity and profit potential 

Liquidity is an essential aspect in terms of desirability for any tradable asset or asset class. Higher liquidity translates to tighter spreads, more competitive prices and faster order execution.

Fortunately, both assets enjoy high liquidity and intraday trading volume and therefore both are highly attractive tradable markets for both retail and institutional traders.

However, if you are aiming for faster returns, Bitcoin would likely be the better option since it provides traders with more frequent opportunities and higher potential returns due to its inherently higher volatility.

Discover more opportunities with CM Trading      

CM Trading offers more than 150 tradable assets including the most popular commodities and cryptocurrencies available in the financial markets. CM Trading clients get access to a wide range of financial instruments, exceptional trading conditions and robust safety and security under the auspices of the Financial Sector Conduct Authority (FSCA) in South Africa.

Being a retail brokerage that specializes in CFDs (Contracts for Difference), CM Trading provides clients with unique advantages such as 100:1 leverage on precious metals, which allows traders with smaller accounts to gain exposure to much larger positions. This translates to substantially higher profit potential, however, it should be noted that leverage also increases your exposure to downside risk.

While leverage typically adds a certain degree of risk to any investment, CM Trading also offers negative balance protection, thereby guaranteeing that potential losses will never exceed your invested capital.

If you are interested in learning more about how you can take advantage of price movements in the best-performing commodities, stocks and cryptocurrencies, or want to profit from fluctuations in the exchange rate of currency pairs, you will find that CM Trading’s unique offering of innovative services and diverse account types is suitable for both beginner and experienced traders alike.

Register here to get started today!

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Trading involves a significant risk of loss and is not suitable for all investors. It’s important to understand the risks and seek advice from an independent financial advisor if necessary.

The information provided here does not constitute investment advice.



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