It’s hard to compare precious metals and cryptocurrency, because they’re different things. It’s like comparing an apple and an orange to abuse the world’s most cliche saying. They’re just not the same. Both of them can be good investments, but they have their own places in your portfolio.
Cryptocurrency is extremely volatile. Hence the “gold rush” of cryptos as of late. People are scrambling to get their piece of the pie, and it’s out there. You can turn a few hundred dollars into thousands in a month or two, maybe less if you’re lucky. A couple of coins I jumped on during the big high exploded less than a week after I purchased them. In other cases you may need to hold for a couple of years before a project catches on. In any case, buying a low cap coin with good potentiality could multiply your investment 10 fold or more in an incredibly short time.
Unfortunately, what makes volatility so profitable is also the same thing that makes it dangerous. A whiff of bad news can send an otherwise solid coin tumbling to the ground, and then your gains are gone just as swiftly as they came. I learned this the hard way. When investing in cryptocurrencies it’s important to take some profit off the top for safe keeping. That can then be invested into other income producing or long term investment assets. That means that if the crypto markets are experiencing a long dry spell then you still have money to maintain a comfortable living. There’s plenty of good investment ideas for that money. Perhaps real estate for a rental or a business investment. However, if you just want somewhere to keep your money that’s not fiat, and that is not going to bounce all over the place then I think that place crypto investors are looking for is in precious metals.
Precious metals have been money for as long as man has been using money. What’s more is that they have a real value in many industries. Gold, silver and copper are used in every electronic device you have to some degree. In fact some people make a business of extracting gold or other precious metals from older PC parts to scrap and sell. Unfortunately, that’s not really profitable unless you have access to an ass ton of decrepit PCs that cost you nothing or almost nothing. (I think I’ll stick to buying my gold.)
Platinum, while utilized for some jewelry or industrial uses, is almost exclusively used in the automotive industry to construct catalytic converters. Auto makers are the biggest buyer of this metal in the world. The work required to extract these metals, the money needed to build the operations which do so, and the real life manufacturing demand involved in these precious metals tends to give them a much more stable value than cryptocurrencies or stocks. In fact in most cases when there is financial turmoil metals tend to go up at other assets go down. When things go upside down in almost any other market everyone rushes to buy metals which they believe will hold value in the event of an economic collapse due to their utility.
As such, many investors hold these metals as a hedge against their other investments failing. This is true of cryptocurrencies, stocks and even real estate. Real estate is definitely a good investment, but the 2008 crash proved to everyone that it’s not foolproof. It’s always a good idea to diversify into as many areas as possible to maintain your wealth, and instead of asking whether you should invest in cryptocurrencies or precious metals I think the answer is both. Which is exactly what I’m doing to protect my cryptocurrency gains for the future.
If you’re interested in diversifying your cryptocurrency gains in precious metals to protect your earnings then there’s a couple of ways you can do it. You can either hold the physical gold yourself or you can pay a storage facility to do it for you. I think both methods have their uses, and they’re both perfectly valid ways to do it. The “right” way is really just up to you and what you want from your investment. Let’s look at the pros and cons shall we?
Managed Bullion Storage
- Bullion stored safely and securely in a vault. No worries about theft.
- Complimentary insurance in case of disaster.
- No need to allocate storage in your house or buy a heavy, expensive safe.
- Ability to instantly sell large amounts of metals if needed.
- You’ll need to pay storage fees.
- Some people don’t like not being in physical control of their metals.
- Requires a certain level of trust with the facility.
Self-Managed Bullion Storage
- You can be sure you have exactly what you paid for.
- Makes you feel like Mr. Money Bags when you polish your gold coins
- No need to trust anybody else with your gold if you’re worried about financial collapse or insolvency
- Possibility of theft from your home and losing your wealth.
- Harder to sell if you need to move large quantities of bullion.
- Harder to store if you own large quantities of bullion.
Both methods of storing metals have their merits, and there’s honestly no reason you can’t use both. You could store the larger portion of your metals with a vault storage facility, and then still have a smaller amount around your residence for safe keeping or collecting. While I think coins are a poor investment due to the fact that you’re charged a premium for them I do have a few on my person as collector items just because I think they’re cool. The good news is if you’re a crypto enthusiast there are plenty of places that will sell you gold for cryptocurrency outright with no need to transfer to fiat. The service that I use which I can recommend is…
For securely storing my bullion investments I use Bullion Star. They’re a Singapore based gold dealer. The best part about Singapore is that they are not subject to jurisdiction from any other world government which means they can protect your privacy and tell the world police to kindly get lost. Opening an account with them is easy and takes only a few seconds unlike some others who will spend two months interrogating you first.
They have some very low storage fees, and in addition to being able to store your coins or bullion they also have a “savings program”. These are a kind of virtual grams of gold, silver or platinum you buy that are backed by the metals in their vault. After you acquire the designated number of savings grams you can then trade them in for a real bar of either gold, silver or platinum. Though they offer only one type of bar which can be exchanged, and it’s not typically the best deal.
Though, what I really like about this program is that the savings grams have a very low spread and storage fee. That means that it’s easy to sell some of your coins at their all time high into the program and hold it for a few months without incurring big losses like you would on buying standard metals. That means your money is safe and sound in time for the year end finance drop. You can then instantly sell them off back into bitcoin to buy the dip on altcoins and get yourself a killer deal on the best crypto projects. All without the hassle of fiat and trying to get the fiat back into bitcoin.This makes them an attractive option both for short term and long term metals investing which is what I really like about them, and why I’m using them to store wealth.
The only problem with Bullion Star is that unless you have an international bank account (which many people don’t) you’ll need to be willing to accept your sell payments back to bitcoin. This is no problem for me. I have other ways to turn my bitcoin into fiat dollars should the need present itself, but you should be aware of it none the less. I’ve done a full write up and review of the Bullion Star service if you’d like to know more about them and how it works.
Could there be a crypto alternative?
There are actually some options available already that may let you have the advantages of stability without ever leaving cryptocurrency. These options do have a few caveats though, and you should be aware of them.
These options work essentially by becoming a stable coin that tracks the price of gold. Some of them, like Digix Gold Token (DGX), are even backed by grams of gold, effectively bringing the gold standard to cryptocurrency. That sounds great, but there is one problem here. You have to actually trust that these pegs will hold their value. Historically, some pegged cryptocurrencies have been notoriously bad at doing what they’re supposed to do, so you’re putting a lot of faith behind this asset.
You also don’t “really” own any assets outside of cryptocurrency. While DGX can be exchanged for physical gold (if you go through the KYC hoops to do it) the fact is that you’re still trusting a third party to hold these metals and maintain the peg. That means that using this token isn’t really any better than just holding real physical gold with a company like Bullionstar honestly.
Don’t think you’ll get out of storage fees by using a crypto token either. DGX actually charges higher storage fees than Bullion Star, and I’m kind of on the fence about whether I would want to utilize these tokens or not. I do like the technology behind it, and the way they collect fees using smart contracts is even pretty cool, but Bullionstar just seems like a better deal right no after considering all the options.