[2017-08-29] Is It Time To Own Gold Or Bitcoin?

[White sugar]

Just like your house provides you with a shelter from all the dangers (to a certain extent), investing in a safe haven provides the same comfort.  A safe haven is a precautionary trade which investors trade under heightened uncertainty. The ultimate safe haven trade for investors has been the yellow shining metal, however, a new popular derivative which is behaving like a safe haven is cryptocurrency. Bitcoin stands tall in that basket because as of today the collective market cap of all the cryptocurrencies has reached a $161 billion for the first time. The acceptance of Bitcoin has been phenomenal especially this year (it has been highly volatile as well).

Heightened Geopolitics Moving Gold & Bitcoin

Investors have panicked after the North Korean missiles have flown over Japan and the president of Japan has called the action reckless. The Asian markets have felt the pain of this event (the Nikkei and HSI indices dropped -0.45% and -0.35% respectively) and the situation is equally intense for the European and U.S. markets. I would expect this pain to become more stark as the counter-reaction from the US would make investors only more nervous. Statements such as "all options are on the table" are the most worrying

The price of gold and Bitcoin are showing solid gains and this is nothing more than a risk off trade. The question is, which one is more reliable? Of course, gold has a massive history to back this thesis because Bitcoin is relatively new. However, this is not to say that Bitcoin cannot be considered as a safe haven trade. In the beginning of August, gold price bounced by $31 (from the lows of $1258.80 an ounce) due to the heightened tensions between the US and North Korea. Similarly, Bitcoin price was trading somewhere near $1985 per coin in the middle of July and as the hostilities between the two nations heightened, the price skyrocketed to $3000. Thus, it is evidently clear that investors have used Bitcoin as another tool to hedge their risk. Simply put, they are considering Bitcoin as a safe haven currency. The below chart shows the performance of the both derivatives.

https://www.forbes.com/sites/naeemaslam/2017/08/29/is-it-time-to-own-gold-or-bitcoin/#524d2ed37f5d

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[Kemarit]

But the question is, can bitcoin be use to hedge against another economic crisis like war? First, countries traditionally print money wildly during wars to "finance" the war, making the paper currency less valuable. And second, brutally, if a country no longer exists one day, what are pieces of paper backed by its government worth? Not much. I'm seeing this applicable to bitcoin as well. Bitcoin could become worthless during this kind of scenario, but bitcoin can be very useful after a massive crisis.

As for gold, it has been used as hedge since time immemorial, and I think it will remain the same. But the problem I'm seeing is how can we ordinary people acquire gold? Can you get gold bullion instead?

So for me, the best strategy is to have both. It only depends on how the individual can get gold or bitcoin as hedge for war or global crisis.

[iamTom123]

But the question is, can bitcoin be use to hedge against another economic crisis like war? First, countries traditionally print money wildly during wars to "finance" the war, making the paper currency less valuable. And second, brutally, if a country no longer exists one day, what are pieces of paper backed by its government worth? Not much. I'm seeing this applicable to bitcoin as well. Bitcoin could become worthless during this kind of scenario, but bitcoin can be very useful after a massive crisis. As for gold, it has been used as hedge since time immemorial, and I think it will remain the same. But the problem I'm seeing is how can we ordinary people acquire gold? Can you get gold bullion instead? So for me, the best strategy is to have both. It only depends on how the individual can get gold or bitcoin as hedge for war or global crisis.

The recent spat of words involving the rogue regime of North Korea and the United States proved that in case of war Bitcoin can surge in value and can be considered as the safe haven just like gold. And because it is not physical (like gold) some people would prefer to park their assets into this cryptocurrency. In case of a war, the best way to store Bitcoin is always the physical purse like Nano Ledger or similar devices.

One of the best reasons why Bitcoin would be the number choice instead of gold in case of a major global economic disruption is the fact that it would be so easy to store and hide them unlike the real gold which can be a magnet for criminals to attack the gold holder. Gold can be heavy and transporting them can be a big problem. This is not true with Bitcoin.

However, we still have to see a real situation here...and I am not hoping that one day this idea can be tested on the field. We don't want a major war again after WW1 and WW2...