Cryptocurrencies are all the rage and gold remains time tested. Over the last few years cryptocurrencies like Bitcoin have been extremely volatile (mainly to the upside) while gold has been fairly stable and moved mostly sideways. Growing and protecting my wealth through alternative investments has been my focus for the last four years so I watch both the precious metals and cryptocurrency markets with great interest.
Bitcoin has risen exponentially in 2017. Clearly buying Bitcoin at $900 and riding it up to $20,000 was a fantastic trade in which the initial capital would have appreciated over 2,000% in less than a year.
How anyone besides a time traveller would have known to do that other than faith or luck is beyond me. I still think there are problems with cryptocurrencies. Even though there are several aspects of cryptocurrencies that I do like and a number of tokens and coins I choose to own.
Gold on the other hand has been slow and boring. As I wrote about in April this year, 2016 looks like it was the start of a new bull market in gold. Prior to 2016 gold had steadily declined since it’s $1,900 highs in 2010.
A Place for Gold
I believe that now as much as any time in history gold (and silver) remains an important part of a diversified portfolio.
I don’t know how high Bitcoin will go. However, in 50 years I believe that Bitcoin will be worth less than a few dollars and gold will have at a minimum retained it’s value in terms of purchasing power if not appreciated beyond that.
I think it’s entirely possible that some other cryptocurrency will be commonly used as a medium of exchange fifty years from now but it won’t be Bitcoin.
I could be wrong about that so I do own some Bitcoin but I’m not willing to take out a mortgage in order to buy Bitcoin on margin, as some people are doing.
If you want to speculate and trade I think Bitcoin and other cryptos are great for that.
I buy Bitcoin on Coinbase and move it to other exchanges to diversify into my “Group of Six” and it has worked out well so far.
If you have some money you can afford to lose then trade and speculate away.
However, I think that gold remains the gold standard in wealth preservation.
I don’t think there is any substitute for buying physical gold and silver from a reputable dealer.
Physical bullion you have in your possession is the ultimate way of removing yourself from an out of control wall-street/banking system. I don’t want to go down the path of radical Cartesian skepticism but with precious metals you aren’t betting on the Janet Yellens and Jamie Dimons of the world having everything under control and are looking out for the little guy.
With gold you don’t have to worry about Satoshi Nakamoto, Charlie Lee or Vitalik Buterin making a bad decision and tanking cryptocurrencies.
Geopolitical Risks Remain
The risks haven’t gone anywhere. The stock market continues to climb but this is one of the longest periods in the history of the stock market without a correction. Meanwhile the fundamentals are not strong.
Debt at the governmental, municipal and personal level continue to grow with no end in sight.
Central banks throughout the world have printed trillions in fiat currency. One of the most important alternative investments to hedge against these risks are precious metals. Blockchain technology, while revolutionary and disruptive to the status quo do not replace gold and silver as the ultimate insurance policy against central bank insanity.