People seem to enjoy pitting gold and Bitcoin against each other. But do I really have to pick just one?
While cryptocurrency and precious metals have many similarities, in many ways they are polar opposites. And you can have both.
Cryptocurrencies have shown a lot of resiliency. Every time doubters proclaim Bitcoin is on the mat for good, it manages to claw its way back up.
Bitcoin went into a freefall after the Chinese government announced plans to ban cryptocurrency trading on all domestic exchanges. But early Monday, the digital currency hit its highest level since early September.
The steady climb of Bitcoin and its meteoric rise this year have led to some speculation that digital currencies may usurp gold. There have been headlines proclaiming cryptocurrencies are killing the yellow metal. But there are some fundamental reasons cryptos will never replace gold.
Recently, Jamie Diamond of Citibank made headlines by labeling Bitcoin a fraud. Whether those comments played any part in Bitcoin’s recent sell off is hard to say, but the true believers reacted with predictable outrage given that the comments came from the ultimate Wall Street insider whose financial supremacy is supposedly threatened by crypto currencies like Bitcoin.
Although my critical comments on Bitcoin over the years have not received nearly as much attention, they have been just as summarily dismissed by the crypto currency crowd. But I am a well know libertarian and follower of the Austrian School of economics. I am not a member of the banking establishment, nor am I a fan of fiat money. I should be one of the good guys. But since I happen to own a company that sells gold, a metal that supposedly Bitcoin will soon make obsolete, the crypto crowd looks at me like a stubborn old buggy whip salesmen who refuses to acknowledge that the future resides in horseless transportation.
Well Bitcoin is not the automobile and gold is not a buggy whip. While Diamond’s comments were not 100% on the money, he is right about Bitcoin’s ultimate demise, just wrong about how it will meet its fate and why. While most fear that government will simply look to make Bitcoin illegal (which could be a possibility if Bitcoin could actually deliver on its promises), it is much more likely to die of natural causes.
Even some of the biggest supporters of Bitcoin and other cryptocurrencies recognize the stability of gold.
Last week was a bad week for Bitcoin. It’s price dropped significantly in the wake of a Chinese government crackdown on cryptocurrency exchanges in the country. Bitcoin’s price has recovered a bit this week, but a recent article published by The Cointelegraph still proclaimed now is a good time for gold.
Cryptocurrencies, especially Bitcoin, have flown a little too close to the sun recently, and it has seen them get burned by a few key monetary institutions, as well as governments. This attack on Bitcoin, as well as fear and speculation around other markets, could spell a good time for investment in gold. Seen as an insurance policy, gold has been a steady and safe investment for hundreds of years. As markets, beyond even the crypto market, get spooked, investors could see a safety net in the precious metal.”
