Posted December 08, 2020
By Ray Blanco
[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?
Youll 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 isnt 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 worlds most well-known index providers could help cryptocurrencies become more mainstream investments, reports Reuters.
Now Bitcoins 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.
Its estimated that the last bitcoin will be mined on May 7, 2140.
Bitcoins 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 hasnt gotten more expensive to milk cows its just that the dollar is less valuable now than it was decades ago.
Bitcoins creator viewed this type of ongoing currency devaluation/manipulation as an abomination. As such, theres 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 doesnt physical gold share the same attributes?
Absolutely, it does.
Yet theres 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. Youll notice theyre all representative of the analog world built by the baby boomer generation. Its 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 Bitcoins workhorse assets is called fintech (short for financial technology) and fintech easily ranks among the markets 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 doesnt stand a chance.
Bitcoin wins, hands down.
Onward and upward,