The stock markets are particularly volatile at the moment and with the threat of war in Eastern Europe and the Chinese on the brink of economic collapse, an investment away from currency-backed funds is the safest options. Historically bullion has been the safe-haven favourite amongst traders, but with the emergence of Bitcoin in 2008, investors now have an alternative option.
But which is the best investment? Both bitcoin and bullion have shown they are capable of making significant profits in a short-space of time – but realistically they still carry the same the risks as any other investment.
The rise of Bitcoin
Bitcoin is a crypto currency that can be used to purchase goods and services over the internet from anybody signed up to the scheme. High-street vendors are also opening up to the idea of accepting Bitcoin payments which can be made using the digital purse of your smartphone. If Bitcoin comes popular with the major corporations and filters into more stalls, Bitcoin could realistically replace credit cards.
Early investors in Bitcoin made a killing. From just $40 the crypto currency hit $1200 last year. The reason for the massive upward trend was because of interest from China – but since they pulled out just before Christmas prices have plummeted by almost 50%. The US and the UK are now looking into the idea of enabling Bitcoins which will up the value again – especially if Amazon and eBay start accepting cyber currency.
Bitcoin however has serious flaws which present a serious risk for investors. The gravest concern is that crypto-currency is not backed by central banks so if it is stolen you lose everything. Not only that, but the value and distribution can be easily manipulated because there are no regulating controls.
Alarm bells were set off recently when two of tbe world’s largest exchangers of Bitcoins were hacked. Tokyo-based MT Gox lost investments to the tune of $550million and is subsequently bankrupt. Investors can kiss their money goodbye. Furthermore, users are charged a commission every time they pay with Bitcoin. The commission can be up to 10 per cent, which is likely to increase spending. This is not appealing to consumers so will there be a demand for Bitcoins? Probably not!
Investing in gold
Market analysts expected a dramatic fall in gold bullion this year which would have made it a great time for investors to buy, but a serious of economic and geopolitical events has seen precious metals gain in value. The price hike has deterred casual investors and consumers. Sales in physical gold are down, but ETF’s are up as professional traders look to make short-term gains in light of the Ukraine crisis.
Continuing tensions in Eastern Europe will continue to push gold prices up which could be good news for owners of precious metals. Consumers looking to invest in gold and silver on the other hand will have to decide which way prices are likely to go later this year.
Some analysts are still predicting a fall in gold prices later this year, so it may be better for investors to hold fire for the time being. However, with China facing a potential financial crisis, gold prices have the potential to soar rather than fall in 2014.
Gold provides a safer investment than Bitcoin, but it is difficult to predict which fund will bring the greatest return. That will depend on the policy makers of banks and governments!