Sorry Gold, You Are Being Left In The Stone Age

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Includes: BTC-USD, COIN, GBTC, GLD
by: Jim Kimmelman
Summary

Bitcoin will put downward pressure on gold.

China is leading the current rally.

Bitcoin has more functionality than gold.

Gold (NYSEARCA:GLD) is being left behind by technology. The technology is Bitcoin (COIN)(OTCQX:GBTC). It is not even the recent price action that gives Bitcoin it's advantage, it's the functionality. Below a chart that explains the differences between different traits of money.

The biggest advantage of Bitcoin is the ease of transfer over Gold. How long would it take you to send an oz in the cross coast in the US? Well you could overnight it and insure it which will cost at least $75. So your gold would arrive in about 12 hours. Compared to Bitcoin, you can send it anywhere in the world instantly and confirmed on its ledger within hours. All for pennies, a 99.9% savings over gold. It is also difficult to spend gold. Typically you will need to sell gold to buy fiat currency to then buy what you want/need. For most products and services, there is no need to convert before spending.

Gold does have historical value over Bitcoin. Salt used to be more valuable than Gold. Historical usage is put to side by new technology. Historically, horse usage was much higher until it was replaced by engine. Often the last argument for Gold is intrinsic value. Sure it looks pretty and can transfer electricity well but many other metals do that as well. If the price of Gold skyrockets, producers will look for cheaper alternatives (which exist) which would push down price.

Bitcoin will continue to press down on Gold. Bitcoin as a new technology, many fear it. Humans have a history of fearing or rejecting new technology. Bitcoin is currently 2.8% of the silver market and .25% of the Gold market. I see Bitcoin growing to a larger percentage by 2020. I see Bitcoin at $4000-5000 by the 2020 halving event which will reduce new supply even further. At In that same time frame I do not see Gold passing $1750.

What To Do With The Current Rally?

Bitcoin investing is not for the weak of heart. It is a new technology and with it, some swings in price. Under $1000, there is strong risk/reward for an investor and should have a place in a diversified portfolio. Panic selling always cuts into returns when investing in Bitcoin. This current rally will likely hit $1500 and pull back to the $1200-1300 range were it will likely find some stability. Price will typically follow the Chinese price. Right now China has a strong premium of $20-25 over US exchanges. Typically when that premium closes means the rally is over.

I still recommend holding Bitcoin yourself over buying the high cost GBTC. You can buy Bitcoin from Gemini or Coinbase and then send them to your own wallet. Those are the 2 most regulated exchanges out there. If you would like to try Bitcoin, you can choose from many wallets here for free. If you would like sending Bitcoin to yourself without putting money into it, this site will give you very small outs that you can try out. Sorry Gold, but Bitcoin is the better investment in 2017.

Disclosure: I am/we are long BITCOIN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.