Combat Inflation With Gold Or Bitcoin? The Answer Is Obvious - Buy Both!
Summary
- It's quite possible that a winner will emerge in the gold vs. Bitcoin battle in fighting inflation.
- Anybody who is certain which will win is fooling himself.
- In a highly inflationary world, at least one of these two assets should do very well. Owning both virtually guarantees that you maintain some wealth.
- TIPs will likely do a poorer job of guarding against inflation that a gold/crypto combination.
Bitcoin (and cryptocurrencies in general) is a very volatile asset class. It's proponents are pointing to a future of mass adoption while its detractors' best argument seems to be that governments will ban anything that isn't linked to their fiat currencies (I think that we are past the point of Bitcoin being a Ponzi scheme.) One has to think that MicroStrategy and Tesla along with others have done due diligence studying the probabilities and effectiveness of a government ban before investing significant funds in Bitcoin. That being said, it is possible that some event will cause the price of Bitcoin to implode. If this happens, gold (and other precious metals) will be left as the choice for inflation insurance, and the money that is currently in the crypto market for that purpose will push these precious metals much higher, likely enough higher to more than compensate for a complete loss of wealth in cryptos.
This is not a reason to totally abandon Bitcoin in favor of gold. If Bitcoin survives its challenges, it's not unlikely that millennials and future generations will prefer Bitcoin to gold as a store of value, especially as the supply of Bitcoin is limited but new gold will be found as space exploration becomes more mainstream. If Bitcoin supplants gold as a store of value and an inflation hedge and becomes mainstream, it's value will increase by a lot - very likely faster than inflation.
Since it's unclear which will emerge as the winner, it's prudent to hold both. This seems like a good time to accumulate Bitcoin at an 8% discount via the Grayscale fund. Accumulate gold at a discount via Sprott's PHYS or CEF closed end funds, or gold miners at a fantastic discount via ASA.
Analyst's Disclosure: I am/we are long GBTC, GOAU.
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