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You just can’t get this look with cryptocurrency. But, perhaps even better with an NFT?
Gold is the original speculative asset but is also the original currency and currency hedge. In recent years people have been substituting cryptocurrencies for gold for all of those purposes. They have been on a wild ride to say the least. Crypto investors tend to be younger and believe it’s different this time as cryptocurrencies truly are better as a currency and investment than gold. Gold investors tend to be older and like the stability and long track record of gold.
“Gold is money. Everything else is credit.” – JPMorgan
“I want Bitcoin to go down a lot further so I can buy some more…If you have gold, you’re dumb as f***.” Mark Cuban 12/19/22
“The Golden Rule: He who has the gold makes the rules.” – Attributed to a 1967 Wizard of Id comic strip
This article will compare the advantages of gold to the advantages of cryptocurrencies. My readers know I like lists so below are lists of reasons to own cryptos instead of gold and to then reason to own gold over cryptos.
Cryptocurrencies have not impacted gold is much as you would think. The rise and fall of crypto should have had an inverse reaction for gold, and it really didn’t. Gold was much more impacted the past two years in the U.S. by the strength of the U.S. dollar.
There is clearly a lot of passion and a dedicated base for both gold and crypto. Gold at this point is still superior to cryptocurrencies for most functions such as a store of value, and a hedge against inflation or a weak economy. It also has numerous physical uses that cryptos don’t, such as jewelry and in modern electronics.
The crypto market like many large newer markets is volatile, speculative, riskier and more vulnerable to manipulation and hacking. Crypto, in my opinion, is too volatile for anyone over 40 saving for retirement. It may eventually move past this but that will take much more regulation and standards. Both gold and cryptos can be used short term by traders using technical analysis. But I do not recommend putting a significant portion of your portfolio in any speculative activity.
While the value of gold moves with global economic conditions, jewelry use, commercial use, hedging use, inflation and national economic policies, cryptos move primarily through sentiment and hype. This has been proven the past three years as cryptos surged as other speculative activity surged and fell rapidly as those speculative bubbles burst. Prices for both are impacted by supply and demand but gold supply only increases about 2% a year, while crypto supply is skyrocketing.
I am not predicting the cryptocurrency category will go away anytime soon, though many of the smaller ones probably will. There are too many entrenched interested parties. But cryptos have too many issues for most investors. It’s currently based on hype and marketing, and there has been more marketing than ever recently. There has always been a lot of hype around gold too, but it has so many advantages over crypto. Despite its issues gold has proven itself over the long haul.
If you want to own gold, there are three primary ways; physical gold, a gold ETF such as GLD, and owning the miners. I recommend an ETF of the miners such as GDX or GDXJ (the junior miners). These are more leveraged to the price of gold than GLD and pay a dividend. By leveraged I mean they move more than gold when gold prices change. They also significantly reduce poor mining results risk by diversifying among a number of companies. For a speculative cryptos play consider the Grayscale Bitcoin Trust (OTC:GBTC) which has been trading at around a 50% discount to its bitcoin holdings recently. It is also much more liquid than holding the cryptos themselves and limited to the largest cryptocurrency.
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Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
