[Winner Announced] Bitcoin Versus Gold

Remember Dec. 16, 2017?

On that day, Bitcoin hit an all-time high of $19,497…

And then the prized jewel of cryptocurrencies promptly began hemorrhaging.

By early February — 51 days later — Bitcoin had plunged below $7,000.

Am I jogging your memory?

You’ll recall that Wall Streeters and novices alike pronounced Bitcoin deader than disco… in fact, the entire cryptocurrency market was administered its last rites.

But then a funny thing happened…

From Feb. 5, 2017, until Oct. 19, 2020, Bitcoin retained its pulse… trading within a tight range from $3,500 to $11,900. To continue the metaphor, you might say that Bitcoin was in a 1,352-day coma.

As you read this, however, Bitcoin isn’t only fully healthy…

Bitcoin is poised to break above $20,000 for the first time ever, with a slew of catalysts helping to drive its price even higher…

>> On Oct. 21, with a simple USD-to-BTC conversion button on its website and app…. PayPal removed virtually all friction from Bitcoin ownership. I tested it, and those with an existing PayPal account can be a Bitcoin owner in about 30 seconds.

>> On Nov. 20, the world’s biggest financial management firm, BlackRock, announced that it believes Bitcoin could one day replace gold as the foremost safe-haven investment.

>> On Dec. 3, S&P Dow Jones Indices, a division of financial data provider S&P Global Inc., revealed plans to launch a series of cryptocurrency indexes in 2021. “The move by one of the world’s most well-known index providers could help cryptocurrencies become more mainstream investments,” reports Reuters.

Now Bitcoin’s revival raises an important question….

In an increasingly volatile world, where should investors look for safety — Bitcoin or gold? For the answer, we must clearly distinguish the difference between physical gold mined from the earth… and digital gold mined from a computer or laptop.

Digital Gold Outshines Physical Gold…

Only 21 million bitcoins exist, of which 18.5 million have been mined — meaning nearly nine out of every 10 bitcoins that will ever exist are already in the supply.

It’s estimated that the last bitcoin will be mined on May 7, 2140.

Bitcoin’s finite supply makes it an attractive hedge against the ever-expanding U.S. dollar.

See, since the Federal Reserve can print new dollars anytime — with no shortage of printer ink for the presses — the value of a dollar erodes over time.

For example, if a gallon of milk cost 25 cents in 1930, $1.30 in 1970 and $3.75 in 2020… it hasn’t gotten more expensive to milk cows… it’s just that the dollar is less valuable now than it was decades ago.

Bitcoin’s creator viewed this type of ongoing currency devaluation/manipulation as an abomination. As such, there’s no central bank deciding anything for Bitcoin… only an algorithm programmed to cease after minting 21 million coins. Therefore, Bitcoin becomes increasingly rare and valuable with every passing day.

But doesn’t physical gold share the same attributes?

Absolutely, it does.

Yet there’s an enormous difference between physical gold and Bitcoin — a difference that gives Bitcoin a profound advantage in price performance as the 2020s progress.

The difference is technology.

An investment in physical gold is also an investment, by proxy, in the equipment needed to extract gold from the ground — bulldozers, rock trucks, water pumps, generators, belts, diesel engines and wash plants. You’ll notice they’re all representative of the analog world built by the baby boomer generation. It’s a world no longer valued among Wall Street, venture capitalists and brokerage houses.

Bitcoin, to the contrary, is symbolic of the digital world. As it follows, an investment in Bitcoin is also an investment in its underlying technology — sought-after breakthroughs like blockchain, universal connectivity, semiconductors, quantum computing, tokenization, 5G and data warehousing/storage. This amalgamation of Bitcoin’s workhorse assets is called “fintech” (short for financial technology)… and fintech easily ranks among the market’s hottest industries.

Consider: An ETF that tracks fintech — Global X FinTech (FINX) — is up 118% since the COVID-19 lows set in mid-March. Over the same period, the SPDR Gold Shares ETF (GLD) is up only 24%.

Boiled down to its very essence, the debate between Bitcoin and gold is a simple battle of analog versus digital. And as the 2020s will demonstrate, analog doesn’t stand a chance.

Bitcoin wins, hands down.

Onward and upward,

Robert

Robert Williams

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After nearly 20 years in the trenches of high finance, Robert has joined St. Paul Research to assume the role of Chief Futurist. Robert cut his teeth as an analyst for one of the most revered and prestigious medical institutions on Earth, whose endowment is valued at $4.3 billion. From there, Robert became the lead...

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