“Which has better long-term investment value, Bitcoin or gold?” is trending on the Internet. Who is the king of safe havens?

Source: Sina Finance

From the record high gold prices in August 2020 to the crazy rise of Bitcoin, which quadrupled in four months in February 2021, more and more people in the market have begun to discuss these two commodities. On February 22, "Which has more long-term investment value, Bitcoin or gold" was on the Weibo hot search list.

The price of gold has been rising since September 2018, reaching a record high of $2,074 per ounce in August 2020, in the middle of the global epidemic, and once became the market's preferred choice for risk aversion and inflation prevention.

The price of Bitcoin happened to take over the baton of rising after the price of gold peaked and began to fall, rising from US$11,000 in October 2020 to above US$57,000 today in just four months, an increase of more than 400%.

Due to the outstanding performance of these two varieties in recent years, more and more people have begun to compare them. Is gold, as a traditional safe-haven variety, challenged by the emerging safe-haven variety Bitcoin?

On Weibo, netizens had a heated discussion on this issue. Most netizens supported gold, while a few supported Bitcoin. Those who supported gold believed that Bitcoin was just a tool for short-term speculation and had no actual value.

Those who support Bitcoin think that they are pessimistic about the future of mankind and think about the baptism of blood and fire. If there is no Internet in the future of mankind, gold will undoubtedly return as the king. On the contrary, if you think that the future of mankind is still bright and the Internet will become a necessity like air and bread, then Bitcoin is full of hope. Rejecting Bitcoin now may be like refusing to believe in paper money when the telegraph appeared, and insisting on physical currency such as "silver dollar". Good money will eventually be driven out by the bully money. (From a cynical middle-aged fat netizen)

Experts have different opinions on this issue:

Experts who prefer gold:

Zhang Wenbin, deputy general manager of Xiamen Gold Retail Division, said:

First, there are two types of gold hedging. One is explicit hedging, which means that most investors believe that the price of gold will rise due to political, economic, and other unexpected factors. The other is relatively rare, called invisible hedging. For example, during the financial crisis in 2008 and in March last year, due to the serious lack of liquidity in the market, gold was sold for cash. At this time, since gold has a wide market acceptance, it was sold in exchange for the liquidity that the market urgently needs. This is invisible hedging.

Second, whether gold can resist inflation can also be viewed from two dimensions. Resisting inflation, in layman's terms, is to preserve value. The function of gold preservation is to guarantee purchasing power. In the long run, the purchasing power measured by gold is relatively constant. Another part is the value-added part, which is about the price of gold. In the short term, it is related to the strength of the currency in which it is denominated. In the long run, currency depreciation is a major trend. In addition, gold itself is affected by supply and demand factors, especially at the investment level. Taking gold denominated in RMB as an example, the average annual increase from 2000 to the present is 9.2%. The second dimension is that gold performs more obviously when hyperinflation occurs, that is, when inflation is caused by currency collapse. Therefore, investment in gold, especially physical gold, must maintain a strategic focus.

Kang Daozhi, founder and fund manager of Daozhi Investment, said:

In the long run, in the context of currency issuance and inflation expectations, gold is still a traditional safe-haven tool. Gold can be independent of any country or government and can also play the role of currency. In other words, whether there is a government or a country, gold is still gold and still has its value. Therefore, from the perspective of long-term investment, gold can hedge against inflation or other geopolitical risks to a certain extent.

Bitcoin itself is a virtual currency, and its recent price increase is largely due to speculation. As for its final value, it has a lot to do with speculators' enthusiasm for speculation and capital liquidity. According to value investor Buffett, Bitcoin itself is worthless.

Therefore, if you want to make quick money, you can participate in Bitcoin. Of course, the risks are huge. No one knows where the high point of Bitcoin will be. No one can say whether the future will really end like the Dutch tulips. Anyone who enters the market may become the last one to take over! As a safe-haven tool, gold can be included in long-term asset allocation as an investment product to hedge risks and obtain returns in the context of inflation expectations.

Therefore, as a long-term investment, gold is a better choice, stable and reliable. Short-term investment in Bitcoin may bring high returns, but of course it also carries huge risks.

Experts who favor Bitcoin:

OKLink Research Institute said,

The deep-seated reason behind the massive purchase of Bitcoin by institutions is the changes in the global macroeconomic situation over the past year. On the one hand, affected by the epidemic, the global economic recovery is expected to remain slow this year; on the other hand, major central banks and governments are unlikely to scale back or stop plans to stimulate inflation in the short term. In an economic environment of high inflation and low growth, in order to avoid the loss of nominal principal and the need to pursue higher returns, investors' demand for hoarding cash naturally evolved into demand for gold and Bitcoin.

The recent rise of Bitcoin is mainly driven by the good news about Tesla and Musk, and is closely related to the recent remarks of Musk, the newly crowned world's richest man and president of Tesla and SpaceX, and Tesla's latest disclosure documents to the US SEC. Because Musk has a strong appeal in Europe and the United States, under his influence, a large number of "fans" bought digital currencies, leading to the rise of Bitcoin.

At the same time, Musk's Tesla company gave the latest disclosure document to the US SEC: "In January 2021, we updated our investment policy to provide us with greater flexibility to further diversify and maximize cash returns." "As part of the policy, which has been formally approved by the Audit Committee of the Board of Directors, we may invest part of this cash in certain alternative reserve assets, including digital assets, gold bars, gold exchange-traded funds and other assets."

In addition, news that major companies such as Morgan Stanley, Mastercard and BNY Mellon are beginning to favor cryptocurrencies has also driven Bitcoin's recent gains.