BTC vs Gold: The Unstoppable Force Meets the Immovable Object
Updated Nov 2023
The narrative of money supply and debt skyrocketing is not new. It’s been a constant theme for decades, with the ceiling continually rising. The concept of hard money, while understood and agreed upon by some, holds little sway in today’s society. Why, you ask?
The concept of hard money, which refers to a form of currency with intrinsic value and is not easily manipulable or subject to inflation, has been a topic of discussion for many years. It advocates for financial systems based on assets like gold or other commodities with limited supply and historical value.
However, in today’s society, the idea of hard money holds little sway for several reasons:
1. Fiat Currency Dominance: Fiat currency, which is not backed by a physical commodity like gold but derives its value from the trust and confidence of the people, has become the dominant form of currency worldwide. Governments and central banks have the authority to issue and control fiat currency, providing flexibility in monetary policy, including adjusting interest rates and managing economic stability.
2. Economic Flexibility: Fiat currency allows for greater flexibility and adaptability. Central banks can intervene during economic downturns by implementing expansionary monetary policies, such as lowering interest rates or engaging in quantitative easing, to stimulate economic growth. On the other hand, hard money systems may not have the same level of flexibility to respond to changing economic conditions.
3. Technological Advancements: The rise of digital currencies, such as Bitcoin, has introduced new possibilities for alternative forms of money. Bitcoin operates on a decentralized blockchain technology and is not controlled by any central authority. While Bitcoin does not possess the physicality of gold, it offers some characteristics of hard money, such as limited supply and resistance to inflation. Its decentralized nature and potential as a store of value have attracted attention and investment.
4. Perception and Cultural Shifts: Over time, the perception and cultural values associated with money have evolved. The focus on hard assets like gold as a store of value has diminished in favour of other forms of wealth accumulation, such as stocks, real estate, or digital assets. The notion of “value” has expanded beyond physical commodities, and intangible assets and investments have gained prominence.
It’s important to note that the debate between hard money and fiat currency is ongoing, and different individuals and communities may hold varying perspectives. The increasing interest in cryptocurrencies like Bitcoin, which offer some characteristics of hard money, suggests that the conversation around alternative forms of currency and stores of value is not entirely diminished.
Ultimately, accepting and adopting different monetary systems depend on a complex interplay of economic, technological, cultural, and societal factors.
The Power of Perception: Mass Psychology in Action
The majority believe all is well, while the hard money/gold bug crowd remains a minority. Their passionate arguments, while valid, have little impact on the broader market. The proof is in the pudding – or, in this case, the price of Gold. Adjusted for inflation, Gold’s performance has been lacklustre. Enter Bitcoin, the digital disruptor that has left Gold in its wake, making it clear that in the BTC vs Gold debate, Bitcoin takes the crown.
The comparison between Bitcoin and gold has been discussed, and both assets have unique characteristics and value propositions. Here are some points to consider:
1. Performance: Bitcoin has exhibited significant price appreciation and volatility, attracting attention and investment from individuals seeking potential high returns. Its decentralized nature, limited supply, and growing acceptance have contributed to its price growth. On the other hand, gold has traditionally been considered a store of value and a hedge against inflation and economic uncertainties. While gold’s price performance may not have been as dramatic as Bitcoin’s, it has maintained its value over long periods and is often viewed as a more stable asset.
2. Market Sentiment and Perception: Mass psychology and market sentiment play a crucial role in the valuation of assets. The perception and sentiment surrounding Bitcoin have been influenced by factors such as its disruptive potential, technological innovation, and the belief in its long-term value. This has contributed to its popularity and widespread adoption among certain segments of investors. On the other hand, Gold has a long-established reputation and is often seen as a reliable asset during economic uncertainty.
3. Risk and Volatility: Bitcoin is known for its high volatility, which can present both opportunities and risks for investors. The price of Bitcoin can fluctuate significantly within short periods, which may attract traders but also introduce increased uncertainty. While not immune to price fluctuations, gold has historically exhibited lower volatility than Bitcoin. Its relative stability may appeal to investors seeking a more conservative approach to wealth preservation.
4. Use Cases: Bitcoin and gold serve different purposes and have different use cases. Bitcoin is a digital asset that operates on blockchain technology and has the potential to facilitate peer-to-peer transactions, act as a store of value, and provide a hedge against traditional financial systems. Gold, on the other hand, has a wide range of industrial applications, is used in jewelry, and is often seen as a tangible asset that can be physically possessed.
The Rise of Bitcoin: A Case Study in Disruption
Even in the face of significant corrections, Bitcoin’s meteoric rise has outpaced Gold. About 30 months ago, we predicted that Gold could never hope to match Bitcoin’s performance. This prediction was met with criticism from the gold bug community. Unfortunately, their day in the sun has yet to arrive.
1. Historical Performance: Bitcoin has experienced significant price appreciation, attracting attention from investors seeking high returns. Its decentralized nature, scarcity, and potential as a digital store of value have contributed to its popularity. Gold, on the other hand, has traditionally been regarded as a reliable asset for wealth preservation over the long term, with a history spanning thousands of years. Its value has been recognized across different civilizations and cultures, and it has served as a hedge against inflation and economic uncertainties.
2. Volatility and Risk: Bitcoin is known for its high volatility, leading to substantial price swings and potential gains or losses for investors. The cryptocurrency market, including Bitcoin, can be influenced by regulatory developments, market sentiment, and technological advancements. While not immune to price fluctuations, gold has historically exhibited lower volatility than Bitcoin. Its relative stability may appeal to investors seeking a more conservative wealth preservation and risk management approach.
3. Market Acceptance and Adoption: Bitcoin has gained significant market acceptance and adoption, with growing recognition from institutional investors, financial institutions, and governments. This has contributed to its increased liquidity and broader market participation. On the other hand, Gold has a well-established global market, and its acceptance and recognition as a valuable asset are widely established.
4. Diversification and Portfolio Allocation: Diversion and portfolio allocation are essential when considering investment decisions. Both Bitcoin and gold can serve as diversification tools, helping to mitigate risk by spreading investments across different asset classes. The appropriate allocation of assets depends on individual risk tolerance, investment goals, and time horizons.
Gold: A Hedge, Not a Holy Grail
Gold is not a poor investment; it continues to trend upwards. However, the reverence with which Gold bugs treat it is misplaced. Gold should be seen as a hedge against inflation and, more importantly, as a safeguard against black swan events. It’s akin to insurance – you don’t buy it because you’re certain disaster will strike, but for peace of mind.
Gold has traditionally been regarded as a store of value and a hedge against inflation and economic uncertainties. Here are some additional considerations relating to gold as a hedge:
1. Inflation Hedge: Gold has a historical track record of preserving purchasing power over the long term. During periods of inflation, when the value of fiat currencies may erode, gold can act as a hedge by maintaining its value or potentially appreciating. Investors often turn to gold as a way to protect their wealth from the potential negative effects of inflation.
2. Economic Uncertainty: Gold can also serve as a safeguard against black swan events or unexpected economic crises. In times of market volatility, geopolitical tensions, or financial instability, gold has often been perceived as a safe haven asset. Investors may allocate a portion of their portfolios to gold as a way to diversify risk and provide stability during uncertain times.
3. Portfolio Diversification: Adding gold to a diversified investment portfolio can help reduce overall risk and enhance risk-adjusted returns. Gold’s low correlation with other traditional asset classes, such as stocks and bonds, means it can counter market movements. By including gold in a portfolio, investors can potentially mitigate losses during market downturns and increase the overall stability of their investments.
4. Psychological Comfort: As you mentioned, gold can provide peace of mind for investors. It serves as a form of insurance, offering a sense of security during times of economic turbulence. The psychological benefit of holding gold can contribute to overall portfolio resilience and investor confidence.
However, it’s important to note that gold, like any investment, carries its own risks and considerations. Various factors, including supply and demand dynamics, geopolitical events, and changes in investor sentiment, can influence its price. Gold’s future performance may not necessarily mirror its historical performance.
When incorporating gold into an investment strategy, it’s advisable to carefully assess individual investment goals, risk tolerance, and time horizon. Investors should also consider other assets and diversification strategies aligning with their needs. Consulting with a financial advisor can provide personalized guidance and help navigate the complexities of portfolio construction.
In summary, while gold is not a holy grail investment, it can play a valuable role as a hedge against inflation and a safeguard during uncertain times. Its inclusion in a well-diversified portfolio can contribute to overall risk management and provide psychological comfort for investors.
Bitcoin outlook 2023
While Bitcoin (BTC) holds the potential to surge to 45K and beyond, it’s currently trading in a highly overbought range on the weekly charts. We believe it could benefit from a cooling-off period, particularly GBTC, which has advanced too rapidly.
There are two possible scenarios at this point. In the first scenario, GBTC could surge beyond the 29 to 30, turning the former resistance zone into support. If this pattern plays out, then GBTC is unlikely to drop below 24; even if it does, it may only be intra-day.
The second scenario involves Bitcoin and GBTC experiencing a strong pullback while our indicators also pull back. However, we are primarily looking for one key development: our indicators returning to the oversold range on the weekly charts. Whether BTC experiences a strong pullback or not, we focus on this indicator-driven approach.
If the first scenario unfolds, the odds of Bitcoin surging as high as 51K would increase to 65%.
The Future of Investment: AI and Tech Companies
AI and select tech companies present far more lucrative investment opportunities. The crowd may not always be correct, but they provide insightful data that can be used to spot new trends. The key is to understand and leverage this data effectively.
In the BTC vs Gold debate, it’s clear that Bitcoin has the upper hand. However, the investment world is ever-evolving, and the astute investor must be ready to adapt and seize new opportunities as they arise.
The potential for lucrative investment opportunities in AI and select tech companies. Technological advancements, including artificial intelligence, have transformed various industries and opened up new possibilities for investors. Here are some key considerations:
1. Innovation and Disruption: AI and tech companies have the potential to drive innovation and disrupt traditional sectors. They can introduce new products, services, and business models to create significant value and generate attractive investment returns. Identifying companies at the forefront of technological advancements and understanding their potential for disruption can be a valuable investment strategy.
2. Data-Driven Insights: The availability of vast amounts of data, along with advancements in data analytics and AI, can provide valuable insights for investors. Analyzing trends, patterns, and consumer behaviour can help identify investment opportunities and make informed decisions. Utilizing data effectively can enhance investment strategies and improve risk management.
3. Evolving Investment Landscape: The investment landscape constantly evolves, and staying abreast of emerging trends and technologies is crucial. As new technologies and sectors emerge, investment opportunities may shift. Adapting to changing market dynamics and seizing new options can be essential to long-term investment success.
4. Risk and Due Diligence: While AI and tech companies can offer lucrative investment prospects, conducting thorough due diligence and assessing the associated risks is important. Investing in emerging technologies and startups carries inherent risks, including market volatility, regulatory challenges, and technological uncertainties. Diversification and a balanced approach to portfolio construction can help mitigate risks associated with individual investments.
5. Long-Term Perspective: Investing in AI and tech companies often requires a long-term perspective. Technological advancements can take time to mature, and the value of investments may not be realized immediately. Investing in this space requires patience and a focus on long-term growth potential.
The future of investment will continue to be shaped by technological advancements, changing market dynamics, and evolving investor preferences. Staying informed, adapting to new opportunities, and maintaining a diversified investment approach can help position investors for success in this dynamic landscape.
