Hard asset cage match: Bitcoin vs Gold

If you haven’t heard, in recent weeks the price of a bitcoin has surpassed the price of an ounce of gold.

While this may be historic, it’s not exactly apples to apples.

I am a fan of both currently, although where gold is bottoming bitcoin is rallying.

Most of you either don’t know or don’t really care about bitcoin, but you should. There’s a lot buzz going on right now that may be a significant game changer for the cryptocurrency.

Let me give you an overview of what bitcoin is, where its value lies and what advantages it brings to individuals and investors.

It’s best to think of bitcoin like it’s a virtual precious metal. Now, once we start talking “virtual” anything, I know there’s plenty of people whose eyes are glazing over and other who are ready to go back to the Personal Liberty® home page and look for another article.

Before you do, let me say, I’m not a tech geek. Bitcoin doesn’t fascinate me because I love all the technology behind it. Hell, I can’t figure out how to sort out the best balance between my cable channels and new streaming packages.

Not the ‘next’ anything

Bitcoin is an inevitability. It may not seem interesting, or a real investment now, but I guarantee it has more thought and support behind it than a lot of penny stocks out there.

And unlike scores of penny stocks, its pitch isn’t that it’s the “next” anything (i.e., next Google, next Facebook, etc.). It’s not a sure thing. It’s risky. But it’s a great way to play the future of money with risk capital.

Bitcoins live in their own world that makes them half commodity, like gold, and half currency. They’re mined like gold and there’s a limited number of them, just like there’s a limited amount of gold.

Unlike a commodity, there is a market for them where they are traded and used as currency. And the unique twist is, it’s a currency that isn’t backed by a nation.

A great proxy

What’s more, because of the blockchain that was developed exclusively for bitcoin, ownership is anonymous. Only the bitcoin holders know how much they have. This makes it a great tool for anyone interested in privacy or interested in getting money outside the purview of the U.S. (or any other) government. At least until you want to cash them in for a country’s currency.

The problem with bitcoin is, it’s still in its infancy and current potential investors have been skittish because of the recurring scandals that have hit bitcoin dealers. But the beefed-up blockchain has actually created value for bitcoin.

You see, now that organizations of all stripes have seen the value of the blockchain, they’re looking for ways to use it in their businesses. There are no direct plays yet on blockchain technology, but bitcoin is the best proxy.

The scoop on the rally

The reason bitcoin is outpacing gold right now is the Securities and Exchange Commission is going to rule soon on whether it’s going to allow the first bitcoin-based exchange traded fund (ETF) to come to market on March 10.

If it green lights the fund, it will allow access to bitcoin trading for millions who are now uninterested in finding a good bitcoin broker, setting up an account and managing a bitcoin wallet. The ETF will make it as easy as buying a stock.

If the SEC decides to ice the ETF, it will be interesting to see how far bitcoin falls on the news — volatility is another youthful feature that bitcoin provides in abundance. If it doesn’t come down too much, that’s a very encouraging sign that there are enough long-term bulls to outweigh the speculators.

The Midas metal

As for gold, it’s getting hit because this Trump rally continues.

But if you read my recent column, you know I’m a bit skeptical that this rally has any real underpinnings. And when a correction occurs, even the bulls say 20+ percent is likely. More bearish estimates are twice that.

Gold is a hedge here. It’s not a position you should hold exclusive to all other asset classes. Just make sure you have some.

If this rally doesn’t continue, you have a correcting stock market and money running from stocks to bonds, or cash. When the “risk on” sign starts flashing, you can be sure that gold will hit rally mode.

Bob Livingston also has written extensively about gold and inflation, most recently here.

If there’s one “set it and forget it” trade, it’s to hold gold. It may not be your sexiest investment, but it will endure. And when the market isn’t on some bizarre Fed-generated multi-year rally it will start to show its real value.

Just buy some

At this point, I’m not going to debate whether you should buy gold stocks or ETFs or buy physical gold. If asked, my answer would be yes.

The one advantage physical gold has — similar to bitcoin — is it’s outside the reach of the banksters and financial corporations. Although pricing has been manipulated by banksters for decades, its true value is even higher than its priced now.

If you’re looking for an alternative to gold, silver correlates very closely to gold. When gold rallies, silver is generally close behind.

If you’re looking to physical gold, buy non-collectible (no premium) coins or bullion. If you want an ETF, check out Sprott Physical Gold Trust (NYSEARCA: PHYS). If you want a stock, go with Barrick Gold (NYSE: ABX), one of the biggest gold miners around. If there’s a gold rally, Barrick will be the first boat to rise.

— GS Early

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