Mar 232015

The last year has been a strange one for currency alternatives in investment. Often viewed as safe havens to simply holding onto currency, alternatives such as precious metals, Bitcoins, and various other commodities tend to operate with a somewhat inverse relationship to the world’s most influential economies. This is naturally a very broad statement and isn’t true at all times, or in strict detail but the concept is generally accepted, and BTC Geek covered it briefly back in December. As the U.S. dollar or the Euro struggles, investors look for more stable alternatives to basic currency, and many will buy stockpiles of resources with universally set prices, which are not quite as impacted by economic downswings.

For the better part of a decade, this meant that resources like gold and silver were pretty reliable. In its early days, Bitcoin may have caught the tail end of that wave with its initial spike in price in the latter half of 2013. But in the past year, a rebounding U.S. economy seems to have shaken up the picture. And in the process, the similarity between Bitcoin and precious metal, from an investor standpoint, has been cast in an interesting light. Basically, since January 2014, both Bitcoin and gold have faced significant drop-offs in price. While they hit their respective lows at different times, the general trend looks similar.

And frankly, this is a comparison we should all have been making more often. The similarities between Bitcoin and gold begin with the simple concept of each as a highly valued currency alternative. Although, Bitcoin differs in that it operates with a predetermined finite supply, while gold (though ultimately finite) is still being mined. But they also extend to how each resource is acquired. Just as Bitcoin can be bought or acquired online, gold now operates primarily at independent websites, to the point that it almost feels like its own version of digital currency. BullionVault, an online marketplace that deals with massive quantities of metal from around the world, demonstrates how this happens in that it stores gold in vaults without investors ever having to see it. To be clear, you have the option of withdrawing gold in physical form, but those who prefer simplicity can buy, store, and sell just as they might any given stock or, to the point, Bitcoins.

Taking things beyond simple acquisition and storage to the actual purpose of investment, Forbes contributor Michael Lingenheld also made the valid point that both Bitcoin and gold can help private investors to get around various risks and controls associated with ordinary banking. The most severe example was the possibility that a government can actually legally confiscate personal savings kept in a bank, whereas no such risk exists with digital currency or precious metal kept in a vault. While this example probably sounds dramatic, it does symbolize the very real uneasiness with which many view ordinary banks, and it’s this apprehension that can make currency alternatives appealing.

Where the two options differ greatly is in their respective futures. Bitcoin has the significant differentiating factor of being accepted as on-the-spot currency in an increasing number of venues and online stores, which in ways makes it a currency of its own, as opposed to an alternative resource. Whether this is an advantage or disadvantage remains to be seen. But for now, the similarities between the two go beyond the pricing charts. Gold and Bitcoin currently have similar purposes, similar methods, and even some similar trends.

This is a guest post by Max Crawford. Max is a private investor and freelance writer who contributes content relating to financial strategy, savings, and market trends.

Dec 212014

Buy Gold with Bitcoin

Here’s a guide on how to buy gold with Bitcoin. You’d be surprised by how many different options you have in converting between Bitcoin and gold/silver, some of them physical gold coins or bars and some of them at an IOU level so you can speculate on the value of gold vs. Bitcoin.

Lots of people who are interested in Bitcoin are also interested in precious metals, especially the early adopters who were disproportionately libertarian in their philosophical and economic thought. Bitcoin, in fact, was and still is, often touted as ‘digital gold’ based on the scarcity of each. Gold has also been used in commerce for thousands of years and has a free market proven vibe to its properties. Both gold and Bitcoin attempt, in small ways, to bypass fiat currencies issued by governments, and both have become a store of value during turbulent economic times when there’s high inflation (think current day Russia, Venezuela, Argentina, etc.)

Here are some options for how to buy gold with Bitcoin, either the physical commodity or just getting the exposure to gold prices through a third-party. I’ll explain the options individually.

Amagi Metals: Amagi is another long-time Bitcoin supporting precious metals seller. They probably have the best pricing for your gold and silver coins if you pay with Bitcoin.

Agora Commodities: Agora is another Bitcoin supporting company that accepts Bitcoin for gold and silver coins and bars. The company is also a long-time supporter of Bitcoin and its community. You can buy your bullion in USD or Bitcoins.

Bitreserve: Bitreserve is a company founded by Halsey Minor (the founder of CNET) and aims to be a convenient currency exchange platform. It is definitely centralized like Coinbase, in that it holds your private keys. In return, you get the ability to seamlessly convert between Bitcoin, USD, GBP, Euro, CNY and yes, also Gold. If you want to get ‘BitXAU’ from Bitreserve, you just send Bitcoins to the ‘Gold’ card on your account, and that’s it. It will be worth a few ounces of gold, depending on how much you send. The gold is held in reserve by Bitreserve (and is therefore fully backed by the physical commodity, not ETFs and use GBI for this). The conversion is instantaneous, and you are effectively buying gold with Bitcoin when you send Bitcoins to your gold card. You can spend it as you would spend Bitcoin, by sending to any Bitcoin address. Do be aware though that there is a transfer fees of 2.4% in and out. The company is promising, has raised about $15 million already, and has a plan for the future. They are trying to add Oil to the mix, which would be quite interesting.

Bitreserve Gold Card

Ripple Singapore: This is a Ripple gateway for gold, silver and platinum. This is an IOU of course, and if you trust this Ripple gateway, you can buy and trade gold and silver throughout the world on the Ripple protocol. Ripple gets strong reactions from people in the Bitcoin community, but this is definitely one of the options. If you want to buy XRP (Ripple tokens), you can try Poloniex or Kraken.

BitGold from Bitshares: This is another interesting idea, using Bitshares. This isn’t an IOU (unlike Ripple) and the price of BitGold on the Bitshares network (one of the BitAssets, along with others like BitUSD, BitCNY etc.) is market determined, and is maintained close to the real price of gold by delegate feeds (101 delegates for the network). This is still a work-in-progress but as more people join the network, the tighter the spreads between BitGold and Gold price should be, and the liquidity is currently poor but hopefully will improve in time. You can buy BTS (Bitshares tokens) on an exchange like Bter.

Photo Credit: TomD77