Commodity Analysis : Gold vs Diamond vs Bitcoin?
It’s always wedding season in India, and gifting gold is very common. If you are American — A Tiffany’s is probably your choice of investment. And if you are a finance professional, receiving/gifting bitcoin as wedding present is ideal(maybe now not so much because of the bitcoin mining crisis and market crash). Visiting the gold souk, some diamond merchants, research and experiences give a very colourful view of these commodities.
Gold
An insight into Tanishq gold services, just for exchanging a 24K gold commodity, they reduce the value of the product by 3%! And as the carats decrease the value reduction increases. Now if you bought gold some 20–30 years back the value of gold has increased way more than the time value of money, so your investment has reaped results, but would you say that this growth in investment would be true some 20–30 years from now, when we are competing with bitcoin and rare diamonds?
Diamond
Recently heard a story where a professional connection bought a $400,000 rare diamond as an investment, could might as well be a tax right off, but he has hopes of doubling his money 20–30 years down the line. Alternatively, if you go to a Tiffany’s they would guarantee a 100% value back on resale albeit the value isn’t skyrocketing like it has been going on for gold or bitcoin.
Comparing onions to diamonds — to increase the value of onions, farmers hoard them and generate demand to drive up value, similarly, could mining diamonds and making them scarce drive up their value in the future? Rare diamonds certainly seem to be in the race, as for Tiffany’s — they need to read my article (hopefully after I get engaged!)
Bitcoin
Bitcoin has been struggling in the market, it is a highly volatile currency or as Amex CEO Stephen Squeri recently mentioned in an interview, that it very well might be a risky commodity comparable to gold. Its mining concerns and energy crisis make it very low in the commodity desirability index. However, it has been volatile over the years, and once the Kazakhstan and other countries energy crisis over bitcoin mining dies, bitcoin might have a future — definitely not as a currency, rather as an investment ( a highly volatile one!)
Analysis
Diamond vs Crypto
9 months back, Sotheby’s made news by selling a rare diamond for 12.5 million dollars in crypto. 9 months back crypto was doing exceptionally well, as for now not so much. Sotheby might have looked like the winner in the deal a few months back, however now the owner of the diamond with a rare diamond might be having a giggle while having a stare down with the rare diamond.
Gold vs Crypto
12 years back had you invested a $1 gold might not have gotten you too far, however bitcoin would have made you a millionaire. A 1 year back investment wouldn’t have gotten you that far with either of the investments. It all depends on your risk profile and holding capacity. Going long is ideal, however everyone doesn’t have the same risk appetite, especially when it comes to bitcoin. From the above value generation, seems like bitcoin definitely emerges as the winner, but would it continue its streak in the future? Gold definitely seems like it has been a stable investment over the past 12 years atleast.
What’s better?
Which is better depends upon your risk tolerance, investing strategy, how much capital you have to use, and how much you can tolerate losing. Bitcoin is much more volatile than gold, making it a riskier investment than gold. Diamonds are a bit behind in the investment race for a general investor, however if you have the capital, go for the rare diamond and get that tax write off!
