Although the fervor has diminished substantially since the crypto price smash earlier this year, we do still see a degree of interest in Bitcoin among precious metals investors.
Bitcoin and metals arguably share some appeal as an “honest” alternative and as a hedge against the fiat dollar and the insolvent U.S. government which backs it.
In light of the Bitcoin price falling dramatically this year, one reader asked, “Is now a good time to swap gold for Bitcoin?” Below is our response.
It may be bad form to answer a question with another question, but it seems like a good way to approach this subject. So we ask; are you in the mood to gamble? If you are, it might make sense to swap some metal for Bitcoin.
Cryptocurrency can potentially generate bigger returns... in exchange for bigger risk. Since there is no tangible backing to Bitcoin, it could conceivably go to zero – much like shares in a defunct “dot com” company.
The two assets are far from interchangeable and will serve different purposes in your portfolio. Bitcoin has often been called “digital gold,” but that comparison is dangerously wrong. Gold is a reliable store of value with a track record thousands of years long. Bitcoin’s price has collapsed from its all-time high of nearly $20,000 to $6,000.
This is a vital difference between gold and Bitcoin: gold will always retain some intrinsic value, while the price of a digital token might go all the way to zero. That is not our prediction for Bitcoin. It is, however, a possibility.
A technology, which is one way to think of Bitcoin, must hold its value amongst a growing number of alternatives. If it cannot, it will be replaced. That happens, even to leaders. Remember Napster and CompuServe?
Bitcoin has to be considered as a speculation. It is a wager on the future of money and on which cryptocurrencies, if any, might succeed in gaining widespread use.
Gold was chosen as money by the market several thousands of years ago and has been adopted worldwide. It is established and proven. Its value can never be zero.
These characteristics are what make it a solid store of value.
If you’d rather speculate on Bitcoin outperforming, then, by all means, switch some gold for Bitcoin. We can even help you do that.
It is easy to sell gold (or silver) to Money Metals and get payment in Bitcoin, Bitcoin Cash, Ethereum, Litecoin, or Dash. Just give us a call or sell your metal at MoneyMetals.com and choose the coin you want to receive as you check out.
If, however, you bought gold as a safe haven and a hedge against the devaluing dollar, it doesn’t make sense to ditch a reliable store of value for a bet on technology. If you still want to own cryptocurrency, we suggest holding on to your metals and buying Bitcoin with dollars or some other speculative asset you aren’t too optimistic about.
About the Author:
Clint Siegner is a Director at Money Metals Exchange, a precious metals dealer recently named "Best in the USA" by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals' brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.