That is the number one question I have been asked over the last month.
It makes sense. I would say owning a little bit of gold is not a bad idea right now as nations around the world pump money into their economies.
Gold is up 16% since its recent low on March 19. That’s not bad, but it lags the S&P 500’s 19% rally.
Gold is good … but it’s not great. In fact, there is another investment option that gives you the same benefits as gold but has much bigger catalysts behind it. The biggest is outperforming both gold and the market — up 42.5% since March 19.
I believe it is a better option than gold … is more attractively valued … and has significantly higher upside potential. Let me explain.
I’m talking about cryptocurrencies versus gold.
This discussion has taken on greater urgency as nations deal with the economic impact of the COVID-19 pandemic and following bitcoin’s historic halvening event Monday. Bitcoin is the first and largest cryptocurrency that gets the most attention.
The catalysts for higher prices are similar, starting with the increasing power of central banks around the world and governments printing money in droves to counteract the pandemic’s economic toll. Between Congress and the Federal Reserve, the U.S. has committed more than $6 trillion so far … and I expect that will be closer to $10 trillion when all is said and done.
I get the need for stimulus, but there is a potential problem down the road. Printing a massive amount of money can lead to inflation and currency devaluation. If you save money in cash and other investments, you could easily watch those savings slip away, year after year.
In a dicey situation like this, you need an “insurance policy” in your back pocket. An asset class that serves up gains while others struggle.
Gold has historically been viewed as the safe haven during recessions and bear markets. Bitcoin is now also seen as a safe haven.
Major players like multi-billion-dollar hedge fund manager Paul Tudor Jones are diversifying their portfolios with bitcoin. Jones even compared bitcoin’s potential to that of gold in the 1970s, when the yellow metal rose 2,329% from 1971 to 1980 to reach $850 per ounce.
Bitcoin is clearly outperforming gold at the moment, so which is better?
Here’s my take, breaking down six critical factors …
Supply
Both gold and bitcoin have limited supply, unlike traditional currencies which governments can simply make more of.
As of yesterday, the supply of new bitcoins coming onto the market was cut in half, from 12.5 bitcoins per block of transactions to 6.25. This is bullish for bitcoin and an especially big opportunity for “altcoins,” which are all the other cryptocurrencies.
We also know the total supply of bitcoin is a set number — 21 million coins. So far, 18.5 million bitcoins have been mined, but the last one isn’t expected to be mined until 2140. That’s just 2.5 million more coins in the next 120 years!
Gold is also scarce. According to Thomson Reuters GFMS, there are 171,300 tonnes of gold in the world today.
So, both gold and bitcoin are scarce, yes. But the supply argument is more bullish for bitcoin over the long term.
Authenticity
Bitcoin and altcoins can be verified on the blockchain in a matter of seconds. That’s one of their main attractions. The blockchain setup allows computers from all around the globe to verify a coin.
Gold can also be verified, but the process takes much longer, is expensive, and a hassle.
Transferability
A digital asset like bitcoin can be sent via the internet to anyone around the world with a connected device.
Gold can also be transferred, but delivering a bar is not easy and definitely not safe. It requires heavy security as well as some type of carrying case.
There is no doubt: Bitcoin and altcoins are the easiest assets to transfer.
Liquidity
Bitcoin is easily sold on any number of large, billion-dollar exchanges in a matter of seconds.
On the other hand, gold is not easily converted into cash, making it a lot less liquid than bitcoin.
It is more cumbersome and very costly to buy and sell gold. Bitcoin is by far the more liquid asset class.
Legal Tender
Bitcoin is only 11 years old, but it is already a widely recognized payment option for large companies such as Microsoft (NASDAQ:MSFT), Expedia (NASDAQ:EXPE), KFC, Subway, Virgin Galactic (NYSE:SPCE), and Overstock (NASDAQ:OSTK). And that does not include the tens of thousands of storefronts around the globe that also accept bitcoin as legal tender.
Gold, on the other hand, is rarely used to buy goods and services.
Bitcoin is still young, but it’s already a better legal tender than gold.
Conclusion: Bitcoin is the New Digital Gold
I believe there is still a place for gold in certain portfolios. If you own it, I am not suggesting you sell your holdings.
The bottom line is that bitcoin and other cryptocurrencies have grown into an asset class that can’t be overlooked. They are creating a whole new kind of thinking regarding money and how it should work. And many are challenging the U.S. dollar and other traditional currencies around the world.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.
