Is investment in 'volatile' Bitcoin better than purchasing gold?

In the past few years, investments in Bitcoin, the largest cryptocurrency launched in 2009, have dramatically increased across the world, while market experts are still debating over the investment in the blockchain-backed asset compared to "digital gold".

The volatility of Bitcoin has remained a matter of concern whereas the advocates of investment in gold are propagating its steady rise.

Even during the peak of the COVID pandemic, Bitcoin's value was skyrocketing. In April 2021, Bitcoin's price hit $61,000. Later, in November, it was trading at a record high of $68,990.

However, Bitcoin's volatility has come to the fore yet again with the value of the digital currency slipping to $35,384 (as on January 24), the lowest since August last year. Since the start of January, Bitcoin's value has declined by around 17 percent.

This drop in Bitcoin's value has heated up the debate around the unpredictable price swings of cryptocurrency. Sceptics point out that while gold continues to be a low-volatility investment, Bitcoin's value is over-inflated and can vanish into thin air any day. The argument is not without merit, as gold, which is hailed as an inflation hedge, has shown steady growth. Its value has increased by 0.3 percent in January itself.

Besides, for the longest time, investors have maintained the tradition of holding on to a portion of their portfolio in gold. This acts as a hedge in times of distress. So, while gold is an asset that holds value over long periods, Bitcoin has not yet proven itself as a safe investment.

Nonetheless, cryptocurrency enthusiasts are using it to store value against corrections and recessions and to diversify their investment portfolios. According to market observers, the choice between gold and Bitcoin should be made on a case-to-case basis while accounting for factors like your risk tolerance, how much capital you can handle losing, investing strategy, and goals.