Why You Should Be Buying Bitcoin in 2017
Gold goes up when stocks go down.
It’s a bit of an oversimplification, sure, but the mantra mostly holds water.
In times of financial uncertainty and distress, commodities consequently thrive. Inflation follows debt as governments eventually respond by printing money to cover what they owe. This lowers the value of paper currency by flooding supply, forcing investors somewhere else — somewhere not tied to government bills.
In reducing the purchasing power of currency, inflation has insidious and unavoidable effects on the stock market. When inflation is high, consumers can purchase fewer goods, and the cost of production increases through higher input costs. This ultimately translates to revenue and profit declines, causing share prices to tumble.
So stocks, while arguably safer than cash during times of reckless inflation, are tied to it nonetheless.
But you can’t print gold like you can print dollar bills, nor can you derive its value from quarterly earnings reports. This gives us something stable to invest in when times start to get rough. It makes for a surefire hedge whenever the world seems to be folding in on itself.
Economic Collapse? Depends Where You Look
I’m sure many of you reading this right now would argue that the world is indeed doing just that. National debt continues to spiral out of control. Interest rates have bottomed out. Stocks are sitting at a considerable halt, while the market waits for earnings to catch up with share value (or vice versa)...
Add in a variety of rising political turmoil both domestic and abroad, and it’s no surprise that gold has had its best year since 2011. The stark reality as we enter 2017 is that fear is building, and people don’t know where else to put their money.
At the same time, the world is, in many respects, better off than it's ever been. Many people don’t realize this (according to polling by YouGov, only 6% of Americans believe the world is getting better), but it’s objectively true by a number of key metrics.
To name a few...
There are fewer hungry people in the world today than ever before. More people have access to clean water. Life expectancy is the highest it’s ever been. The percentage of people living in extreme poverty has plummeted. Violence is down. Leading pollutants have been reduced substantially. The world is more literate than at any other point in history...
These items don’t make national news, of course, because they don’t keep you glued to the TV (maybe you’re yawning already), but they’re very real and telling metrics. The mainstream media will continue to bombard you with exposure to things like shootings, bombings, and outbreaks because they catch your eye and translate to ad revenue... But don’t let them fool you: we’re doing just fine, all things considered.
The world isn’t perfect, of course, and there’s plenty of work to be done, but on the grand scale of history, we pretty much have it made. Keep in mind you’re currently reading these words on a machine with more computing power than all of NASA had in 1969. Not to mention the data is being transmitted through thin air...
We live in the era of instant information, and with information comes power. Economies will always have their ups and downs, but quality of life only goes up over time as humanity gets smarter. At least it’s been this way for the last 6,000 years.
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Gold: A Fortune Only in Misfortune
Do any of these facts make gold a poor investment decision? Well, not necessarily. If you’re just looking to trade the cycle, gold has everything going for it right now.
But if you are betting on total collapse and a return to the gold standard, I can’t exactly say I’m with you. Sure, gold would be a good thing to own during financial Armageddon, but only in physical form, and only if it’s well protected. If you really think the apocalypse is coming, you might as well just stock up on guns, ammo, and MREs instead.
And that’s the thing about gold that caps its upside... its point of highest value is only when the world falls into chaos. It’s a bet based on pessimism. It’s a form of insurance or a trading vehicle at best. Frankly, I’d rather just set up my bug-out bag and be done with it.
The fact of the matter is if you were to ask any of the world’s richest people how they made their fortunes, not a single one will tell you they did it with gold. Most of them probably own gold in some form as a hedge, but none of them have leveraged it to reach such enormous levels of wealth.
That’s because while gold goes up when stocks go down, it also goes down when stocks go up. You can’t get rich off gold unless your exposure to stocks is negligible... and if you’re not investing in stocks, well, you’re probably never going to be wealthy, period.
What would happen, though, if gold didn’t just go up when stocks went down? What if it also went up when stocks went up?
Would you invest? Well, you’d be pretty stupid not to...
Of course, that’s not how gold works, and it never will be... But what if there were an asset that actually behaved this way? What if there were an investment that served not only as a hedge against the dollar, but also moved in tandem with society’s progression rather than its collapse?
Well, you might be surprised to learn that there is...
Gold is Good. This is Better
Before you get too excited, know that this isn’t some magic moneymaking scheme, nor is its existence a secret. In fact, you’ve probably heard of this asset before and said, “No way, too risky, not for me.”
But in doing so you unfortunately would have been wrong. You would have passed up the chance at what’s been a truly historic profit run, possibly because you may fear things that you don’t understand yet... possibly because you’re afraid of things that are new.
If you haven’t figured it out yet, I’m talking about Bitcoin.
In times of economic uncertainty, Bitcoin has so far proven a safe haven for investors, just as has always been true with gold. But Bitcoin has also proven to be more than just a fallback because, unlike gold, when stocks are rallying, Bitcoin rallies too.
Trailing the last 12 months, the S&P 500 is trading in negative territory. SPDR Gold Shares (NYSE: GLD) have climbed 14.4%. Bitcoin is up 74.9%.
Trailing five years, the S&P 500 is up 68.8%. Gold is down 26.5%. Bitcoin is up 24,900%. And yes, that’s a comma, not a decimal point.
In other words, when stocks go up, Bitcoin goes up. When stocks go down, Bitcoin still goes up. At least that’s how it’s been for the past half-decade or so.
Put quite simply, this lack of correlation with the dollar makes Bitcoin a particularly attractive investment in an environment where all the conventional vehicles have become inflated. None of this is to suggest Bitcoin has infinite value, but after years of traditional investors channeling their inner Chicken Little, screaming that the sky is falling, the currency just keeps chugging along.
The Bitcoin Horizon
Will there be continued bouts of volatility for Bitcoin investors over the next several years? Absolutely, but the good news is that metric continues trending down.
And as volatility continues to fall, real-world transactions will only continue to increase, as Bitcoin continues to morph from a speculative trading vehicle to a legitimate currency — a currency not backed by faith in any particular government or the collapse thereof, but by faith in technological progression.
In December 2014, I wrote to Wealth Daily subscribers making the case for Bitcoin as a long-term investment after the speculative crash. At the time, the currency was trading at $320 a unit. Two years later, a single Bitcoin now goes for $710.
If you didn’t pay attention then, or if you’re just joining us now, it might be time to take the advice with less salt. This time I’ll be a little more specific, though, and call for a price: Bitcoin will hit $1,200 some time before the close of 2018.
You can quote me in two years time.
Until then, here's another bold prediction that's been proving dead on.
Until next time,
Jason Stutman is Wealth Daily's senior technology analyst and editor of investment advisory newsletters Technology and Opportunity and The Cutting Edge. His strategy for building winning portfolios is simple: Buy the disruptor, sell the disrupted.
Covering the broad sector of technology and occasionally dabbling in the political sphere, Jason has written hundreds of articles spanning topics from consumer electronics and development stage biotechnology to political forecasting and social commentary.
Outside the office Jason is a lover of science fiction and the outdoors, and an amateur squash player at best. He writes through the lens of a futurist, free market advocate, and fiscal conservative. Jason currently hails from Baltimore, Maryland, with roots in the great state of New York.