Bitcoin vs. Gold

A question that I often get is, “Could Bitcoin be used as an alternative to the Dollar, like gold could be?”.  Well, that’s an awesome question, because that’s exactly what Bitcoin, for example, is; an alternative to the Dollar!  Many people look at gold and silver in the same way, but there is sometimes a divide between which would be the better alternative.

What I like to do when it comes to currency trading, investing, etc., is look at the fundamentals (or in many cases, the lack of fundamentals).  The reason so many people are looking for an alternative solution is because they see that the Dollar lacks many things!  However, it’s pretty obvious as you look deeper into cryptocurrencies that they also lack a lot of things needed to be a true stable alternative.  Bitcoin has no built-in consumer protection, it’s vulnerable to orchestrated attacks, and many countries are initiating “reactionary regulation,” because central banks do not want to compete with something like Bitcoin, so governments just ban it!  On top of that, cryptocurrencies are even less tangible than government backed fiat currencies!

Gold, on the other hand, is pure and simple.  It’s been used as a type of currency for 6,000 + years, and I believe it will continue to do so for as long as their are people to buy and sell things.  That’s why when people ask me which is the better alternative to the Dollar, I point them to precious metals.

However, with all of that being said, obviously there’s something very large happening with Bitcoin, as its price continues to raise to new highs!  2017 was a MASSIVE year for Bitcoin, starting below $1,000 at the beginning of last year, and reaching nearly $20,000 by mid December.  

As Bitcoin has grown in value, it has also become a more mainstream option for investors.  An unprecedented number of people are now getting into the cryptocurrency market, and some businesses are even hopping on board by starting to accept the digital currency as payment, including precious metal bullion dealers.  Think about that!  Buying the utmost tangible form of wealth with the ultimate fiat currency thus far in history!  

We’re living through unique circumstances as the precious metals markets and cryptocurrencies collide.  Bitcoin is increasing tremendously, while gold and silver dropped in value several times throughout last year (although, they did rally strong at the end of 2017).  This leaves room for Bitcoin owners to use the currency to buy bullion, garnering them a quality investment at a low price.

The sustainability of Bitcoin is still in question throughout the industry, though.  Some think it’s an unstoppable currency that’s on the cusp of worldwide acceptance, while others think it’s a bubble waiting to pop.

The truth is, no one yet knows of what it will hold, because it has precedence for both large crashes, as well as continued legitimacy as a global investment.  In my personal research (which hasn’t been as extensive as other topics) showed that in Bitcoin’s very short history (approaching 9 years), there have been four occasions in which the price crashed 80%+ before beginning another surge later on.  Obviously everyone has seen its potential in 2017, but multiple price drops of that significance shows that its stability should be in question.  

However, like I mentioned above, Bitcoin’s legitimately is growing.  Later this month, investors can begin trading bitcoin futures on the Chicago Board Options Exchange and Chicago Mercantile Exchange, with Nasdaq planning to launch bitcoin futures next year.  The fact that major U.S. financial institutions are accommodating the cryptocurrency speaks volumes about its legitimacy.

At this point, it’s a matter of conservatism.  Most of the investors that I talk to (including myself) are very conservative precious metals investors, buying gold and silver for the purpose of retaining real value and using them for trade in the case of a financial collapse.  If you are one those investors, then Bitcoin does not offer the same type of alternate currency that gold does.  Sure, it’s nice knowing that there’s a de-centralized currency option out there, but just know that it holds many of the same weaknesses that the Dollar does, if not even more depending on what way you look at it (i.e. the U.S. is still the strongest country in the world, therefore its currency still is, too).

Hopefully this comparison has helped you see the difference in alternate currencies, and will be able to benefit you and your family!