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Gold, Bitcoin, hedgehog trading… What's it all about?

by , 12 June 2019
Gold, Bitcoin, hedgehog trading… What's it all about?
Q. "I see there's been a lot of hype about Bitcoin and gold over the last couple of weeks. Could you briefly compare the two coins so that I can understand better what I am trading?"

A. I'll compare Bitcoin and gold with different categories. 
6 Differences between gold and bitcoin 
1. What is it? 
Bitcoin is a digital and an intangible currency that is used to buy, sell, monitor and exchange for goods and services. Bitcoin is also known as the "digital gold" as its been on a continuous uptrend and is considered as a new safe haven against any regulated currency or market.  
Gold is a physical and tangible precious metal that is used to buy, sell and exchange goods and services.  
2. Mining
To mine a bitcoin involves computer power to solve complex mathematical problems. The more bitcoins that are uncovered the more difficult and the more expensive it is to mine for new ones. 
To mine for gold depends on the amount that is mined from under the earth's ground. The more gold that is uncovered, the more expensive and difficult it is to mine for more of the golden metal lower down in the veins of the earth.   
3. Limited
Bitcoin is finite as it is only capped at 21 million in total. So far over 80% of bitcoins have been mined and is estimated to take until the year 2140 to have mined all of them.  
As gold is a resource, means there is a finite amount on earth.  According to the U.S. Geological Survey estimates that there are about 57,000 tons left to be mined.  
4. Storage: 
Bitcoins are stored in digital wallets either by an online service or on a device such as mobile, computers and other technology devices. The problem is this. Bitcoins are unable to be recovered if the owner loses his private key or if there is a digital crash or disaster.  
Investors store their gold in banks, vaults, deposit boxes or at their houses and offices. Gold is also able to withstand any natural disaster and can be insured in case against any theft. 
5. Regulation:
Bitcoin currently is unregulated by governments and are run through a decentralized chain between buyers and sellers. This means there is little power for the government and any private organisation to manipulate, influence and have any major control over the regulation of the digital currency.
The issue with this is that we've seen a number of crypto exchanges defaulting leading to fraudulent activities. This makes it a highly risky currency for investors to fully trust their money in. 
Gold operates in a highly regulated framework, by different governments, economies and countries all around the world which is backed and priced by the US dollar. 
This means the gold price can be highly influenced by any major economic, socio and political event or factor i.e. interest, bond and inflation rate changes.  
6. Protection or speculation:
At the moment, Bitcoin is mainly used and is seen as a speculative investment, for the reasons that it is not regulated, not backed by a physical asset and is not yet seen as a medium of exchange… Traders and investors incentive is to mainly profit from the rise or fall of Bitcoin…
Gold, on the other hand, is seen and is used as a protection investment. It is held for the long term, passed onto other generations andb can be exchanged for almost any currency if needed.
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Q. "Timon could you explain what impact a market maker’s profit has generally on trading transactions?"
A. If you're trading through means of spread trading or CFDs, then the first thing you'll need to look at is how wide the spreads are compared to the actual market’s price.
The spread of a transaction is the difference between the bid (buy price) and the offer (sell price), of the market you wish to buy or sell. 
The wider the spread, the more profits the market makers and brokers make.
The narrower the spread, the less profits the market makers and brokers make.
This is why you'll need to research a couple of different market makers and brokers, to find spreads that are tighter.
With Forex, nowadays, it’s easy to find a reputable broker who offers spreads of 1 to 5 pips per transaction. When it comes to highly liquid shares, the spread should be less than R4.00.
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Analyst, Red Hot Storm Trader
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Gold, Bitcoin, hedgehog trading… What's it all about?
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