Cybercrime, Cryptocurrency, & How to Keep Your Money Safe

Cybercrime, Cryptocurrency, & How to Keep Your Money Safe
Have you ever heard of the saying “harder to break into than Fort Knox?” The phrase means that accomplishing a task is difficult, bordering on the impossible. A huge portion of the US’s past gold reserves were stored at Fort Knox in the past and it was never robbed. Gold is safe to invest and safe to own – it’s been a proven safe haven asset for centuries. And, with the backing of the entire financial market, gold ownership is harder to take away than breaking into Fort Knox.

Solidity of Electronic Gold Ownership

When it comes to Gold ownership, the three most common methods are: ETF’s (Exchange Traded Funds), Gold Futures, and physical ownership. The first two security types are by far the most common:
  1. ETF’s are publicly traded funds whose price is linked to the current value of gold. Anybody can purchase them, and there’s a very clear record of ownership transition that’s backed up by the entirety of the world’s financial institutions.
  2. Gold Futures are similar to ETF’s in that they are electronically traded, but the overlap ends there. Futures are an agreement that an asset will be bought at a specific price at a future date – essentially locking in the price of gold at today’s rate in hopes that you can buy gold tomorrow for cheaper (or sell for higher).
  3. Physical ownership is the riskiest in terms of security, which can be mitigated with holding physical assets in a secure institution and possibly taking out insurance.

The Bitcoin Wallet “Credit Card”

There’s a growing argument that crypto-currencies such as Bitcoin or Etherium are equivalent safe haven instruments and extremely safe to own, but that’s not entirely true. While the security of these online currencies are airtight, there can be significant security flaws around the end users. The largest cryptocurrency today is Bitcoin, which is stored in individual “Bitcoin wallets.” Bitcoin wallets are tied to individual user logins, which means a savvy hacker with a username and password can instantly gain access to the entirety of your cryptocurrency funds. They can use your bitcoin wallet like a credit card – only that your Bitcoin wallet doesn’t have the billions of dollars invested into fraud protection like credit card companies. In other words, your bitcoin wallet can be entirely liquidated if compromised. There’s practically no way to reverse the transaction and no time to react when you realize your Bitcoin wallet is compromised. The cherry on top is that all parties are anonymous, meaning it’s nearly impossible to figure out where your money went. With Gold ETF's or futures, those securities take time to settle, meaning it’s entirely possible to reverse a transaction a day or two after it has been bought or sold, and your brokerage oftentimes

The Cryptocurrency Grey Area

But the risks of crypto-currency do not end there. Officially, crypto-currencies are currently drifting about in a grey area – they are not officially recognized by most government institutions and have a stigma of being associated with illegal transactions. A huge risk for cryptocurrencies lie with future government regulations – each country and state presents a point of risk as any one of them can introduce new legislation which can greatly affect how cryptocurrencies function within their borders. It goes without saying that if a Government were to issue any law even with remotely caustic or regulatory language against these currencies, well, it wouldn't be long until severe market corrections occurred. In other words, Bitcoin would crater. It is a possibility that certain countries may mark cryptocurrencies as illegal, such as Saudi Arabia has done – which compromises any individual investor’s ability to hold and trade cryptocurrencies.

Government Regulation

Have you heard of government regulation being a threat to precious metal ownership? The answer is no – gold has been around for thousands of years and it still maintains its position as an asset of considerable value. Gold is an invaluable metal used in a number of different industries – it’s used in jewelry, it’s one of the best conductors for electricity on the planet and it’s used in medicine. It’s a multi-functional metal that also happens to be one of the best safe haven investments available. Even better, electronic ownership of a gold future or ETF is secure – it’s extremely difficult to take out of your possession and its possible to reverse a liquidation of your assets even after the order has already been placed.

Gold is the proven Safe Haven Investment

When it comes to safe haven investments, gold is the safer choice. Less of gold’s price is driven by consumer hype, there’s much less risk of having your positions compromised, and no chance that potential government regulation can radically change the values of your holdings.

The Incredible Risk of Bitcoin and Other Cryptocurrencies

Today, cryptocurrencies such as bitcoin are still emerging and there is a large cloud of uncertainty hovering block chain currencies, whereas gold has been held as a safe haven asset for centuries. While both security types have been performing very well compared to the S&P 500, gold has been a tried and true safe haven investment for decades whereas cryptocurrency is still not yet proven in the space. Furthermore, the risk of cybercrime is far greater with anything connected to electronic wallets. Owning physical coins or bullion will prevent electronic theft, so long as you have a good safe or lockbox. As for the value of cryptocurrencies, big Wall Street players have expressed significant concern against cryptocurrencies, with JP Morgan CEO Jamie Dimon coming out strongly against Bitcoin recently: “The currency isn’t going to work. You can’t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart." “If you were in Venezuela or Ecuador or North Korea or a bunch of parts like that, or if you were a drug dealer, a murderer, stuff like that, you are better off doing it in bitcoin than US dollars. So there may be a market for that, but it would be a limited market.” Bitcoin was launched in 2008 – meaning it has weathered zero financial crises. Would you choose a risky, unknown instrument or a tried-and-true investment as a safe haven investment?