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Precious metals and cryptocurrencies – what are the similarities and what are the differences? Which one between these asset classes can you rely on and which one possibly make you rich?
Precious metals do not need an introduction. Metals have been around since the very beginning. Even before the beginning as we know it. You can hold precious metals in your hand, you can wear them as jewelry on your finger, wrist or neck. You can also invest in it as a physical asset or you can trade it through different financial instruments. On the other hand, cryptocurrencies were first created in 2009 when mysterious BitCoin appeared on financial markets as an alternative decentralized payment option. It can not be tracked by standard government entities. Cryptos are electronically ´´mined´´ using an open-source software-based on blockchain technology.
A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it very secure. It is nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology – a distributed ledger enforced by a disparate network of computers. A most important feature of cryptocurrencies is that they are generally not issued nor controlled by any central authority. This makes then theoretically immune to government interference or manipulation. 
The precious metal is a term for the classification of metals that are considered to be rare and/or have a high economic value. The higher relative values of these metals are driven by various factors. For example their rarity, industrial usage, and investment volumes. The most popular precious metals for investors are Gold, Silver, and Platinum. 
Cryptocurrencies, like fiat currencies, do not have physical backing. It’s a total digital solution backed by computer code and miners or nodes. On the other hand, there are natural precious metals. There is a fixed amount of precious metals on planet earth.
Bitcoin is the leading cryptocurrency today with a market cap of approximately 180 billion dollars. The amount of bitcoins is today a little bit more than 18 million, and the total supply that will be mined is capped at 21 million bitcoins. As a result, precious metals and cryptocurrency (Bitcoin in particular) are more alike because they both have a limited supply.
While the process of procuring precious metals as well as cryptocurrencies is referred to as ‘mining’, it means completely different processes. In the precious metals’ context, mining companies need machines and other equipment to dig precious metals out of the ground.
In the context of cryptocurrencies’, capital investment is needed to use mining farms. These mining farms have a lot of electricity and computers which are needed to create new crypto.
The technology and network behind cryptocurrencies are mainly focused on transactions, to allow secure payments whereby, the underlying Blockchain network has to handle the transactions. This is done in the form of digital tokens which can be used to transfer value across the network. Cryptography is used on every crypto transaction: the cryptographic puzzle makes the protocol extremely difficult to hack and secure. If you compare crypto currency vs fiat currency one can say that cryptocurrency is more secure and far more cost-efficient in the context of transactions. In this digital world, the easy to transfer property of cryptocurrencies give it value. However, one must consider the energy consumption behind the cryptocurrencies. As per sources,  in the middle of 2019, Bitcoins energy consumption equaled that of Switzerland.
Gold as a precious metal has stood the test of time: it has proven its value for more than 3000 years making it a very trustworthy financial asset. Gold has also proven to be a good hedge against inflation or any other monetary crisis on a global scale. As a result, gold is expected to maintain its intrinsic value and be treated as a form of money.
One of the main differences between precious metals and cryptocurrency is that precious metals are being used as actual commodities in several industries. Gold and silver are tangible assets and can be used to produce goods.
The future of precious metals can be rather easily predicted. When a financial crisis is around the corner, precious metals tend to get more expensive, since investors are moving their money to safe-haven asset classes. Precious metals are a very popular commodity and are used in several industries all over the world. The global industry is growing on a global scale because of the rising demand from India and China. As a result of this industrial demand added with the demand from financial markets gives a bullish outlook on precious metals for the coming years. Cryptocurrencies’ future can be predicted but it is highly speculative since this asset class is an infant compared to precious metals that have been around for thousands of years. Although cryptocurrencies can be the future, it is too speculative to predict price movements for cryptocurrencies. Time will show.
Cryptocurrencies are very speculative and highly volatile since they were first introduced to the World only 10 years ago. Investing in cryptos can make you rich quickly but it can also bankrupt you. Gold, on the other hand, has a proven track record for thousands of years and it has held its value. It also has shown stable growth and very good protection against inflation and financial insecurities.
Disclaimer: This article is for informational purposes only and is not intended as an investment analysis or recommendation to sell or buy commodities. Tavex is not responsible for any decisions made based on this information. Investing is associated with opportunities and risks, and the market value of commodities can both increase and decrease. Past or future yields on the commodities and financial ratios shown above do not represent a promise or an indication of future earnings.
 Investopedia – https://www.investopedia.com/terms/c/cryptocurrency.asp
 Investopedia – https://www.investopedia.com/terms/p/preciousmetal.asp
 BBC – https://www.bbc.com/news/technology-48853230