It’s so funny to think that Bitcoin (CCC:BTC-USD), of all things, has become a relatively stable, slow-moving cryptocurrency in 2021. It really wasn’t very long ago when Bitcoin was among the most speculative, volatile assets that people could own.
I suppose that we could compare it to music. Younger generations don’t want to listen to what their parents listened to.
We could make a loose analogy to cryptocurrencies here. First-generation crypto fans were all about Bitcoin. Today, some young investors are looking for the next shiny object in the world of digital assets.
I’d like to suggest that it’s time to bypass the flash and fanfare, and give due credit to the digital token that started a revolution — and should continue to have value for many more generations to come.
A Closer Look at the Bitcoin Price
None of this is to suggest that Bitcoin isn’t exciting. The gains have, indeed, been swift and considerable.
The run that has taken place this year so far, from $30,000 to more than $50,000, has been impressive. Outside of the world of cryptocurrency, not too many assets have achieved returns of that magnitude.
Bitcoin even reached an all time high of $64,863.10 in mid-April, though the price backed down after that. This may be due, at least in part, to the “smart money” engaging in some profit taking.
As of May 11, the price was close to $56,000 and everything seemed calm and steady. Perhaps this is just a consolidation phase in preparation for another leg up — we’ll find out soon enough.
Old Like Gold
This might sound strange, but I’m actually willing to compare Bitcoin to gold. Please, bear with me on this one.
Gold is old and revered among precious metals aficionados. It’s been a store of value and a form of money for millennia.
Likewise, Bitcoin is the oldest cryptocurrency and the most famous of them all. It also has the largest market capitalization, even with the stiff competition from so many altcoins.
Gold has a certain level of trust among investors, and so does Bitcoin. Plus, they’re both great for a buy-and-hold investment strategy.
Moreover, they’ve both proven their worth as hedges against U.S. dollar inflation. If anything, inflation should give a boost to gold and Bitcoin.
And with the government printing and spending dollars in the trillions, inflation is a force that’s destined to destroy your purchasing power — unless you’re making purchases with a widely accepted token like Bitcoin.
Thus, compared to the competitors within its asset class, Bitcoin actually is old. Yet that’s part of its appeal for folks seeking a less risky crypto coin to invest in.
Saturday Night Disappointment
In stark contrast to Bitcoin is the latest shiny object, Dogecoin (CCC:DOGE-USD).
In terms of percentage gains, I’ll admit that Dogecoin beats Bitcoin by a mile. But DOGE isn’t for everybody.
It’s super volatile and the price is based largely on short-term sentiment. If Bitcoin can be compared to gold, then Dogecoin can be likened to a penny stock.
You may have heard about how the Dogecoin price tanked after Elon Musk’s recent appearance on Saturday Night Live, in which he called DOGE a “hustle.”
I was watching intently as social media gurus implored their followers to load up on Dogecoin prior to the episode, in anticipation of the price going “to the moon.”
I’ve always believed that if everybody “knows” that an asset is going to go up a lot, it’s probably not the right time to buy it.
So now, apparently Musk isn’t finished with Dogecoin yet because reportedly, SpaceX will accept it as a form of payment.
I guess DOGE might actually go to the moon, then. I’ll be watching and waving, from planet Earth.
The Bottom Line
It’s perfectly okay to keep both feet on the ground and invest in tried-and-true assets.
Bitcoin would fall into that category, at least among cryptocurrencies. It’s not as old as gold, but is a pretty solid inflation hedge in its own right.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content — and crossed the occasional line — on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
