Bitcoin or Gold? Cryptocurrencies continue to rally. Bitcoin might surpass that $60,000 mark again soon. The other more prominent currencies, such as Ethereum, are equally close to record prices.
| | | | | | Cryptocurrencies: New Highs... Now What? |
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| Dear Reader,
I'll keep it short today. I receive the same question a lot. Bitcoin or Gold?
I want to explain my view in a straightforward way. But first, we can talk about the trend.
Cryptocurrencies continue to rally. Bitcoin might surpass that $60,000 mark again soon.
The other more prominent currencies, such as Ethereum, are equally close to record prices.
Still, from my perspective, you should be cautious about cryptocurrencies.
Here's my advice.
Fed Driven Worries
The rise in crypto prices is apparently due to fear of central bank action.
The U.S. central bank, for example, has announced that it will continue its very loose monetary policy with low-interest rates and bond purchases.
This potentially spells trouble for the purchasing power of the dollar.
Declining attractiveness in paper currencies is the result of an expansion of the money supply.
There are arithmetically more dollars than ever before.
The velocity of circulation of the notes still leaves something to be desired, say economists.
Otherwise, consumer goods prices would also finally be rising.
If the money supply continues to rise – even in the eurozone – the euro or the dollar will become increasingly critical, not in relation to each other, but in terms of wealth preservation.
I understand the idea that independently generated cryptocurrencies, whose quantity is firmly limited to boot, are more attractive.
But there are numerous arguments against using these currencies.
Exploding exchange rates – good for the money?
Imagine if currencies such as bitcoin continued to gain. The next record prices above $60,000 could well be $70,000 or $80,000, from what I read. Would you still spend that money?
Probably not – because as prices rise, you would get more goods for your money in the future.
Accordingly, it's gratifying for owners of Bitcoin that the currency is becoming more valuable.
However, I would not use Bitcoin and its kindred as a money substitute for all things.
Conversely, if the price were to fall, you would have to expect that the supposed currency would be swept out quickly because people would panic about further losses in value.
As a trader, would you accept a fading currency if you were not legally obliged to do so?
That's why I stick to my guns: if you want to gamble on a trend, bitcoin can be interesting.
As a substitute currency, I recommend gold and, in case of doubt, silver, which are not legal currencies but have always been in demand.
If you're afraid of inflation, however, you can also invest in stocks.
The prices will rise just because of the increasing money supply. If you park money in substantial shares and the prices rise, you at least secure your purchasing power.
We'll talk more about inflation and how to approach this environment soon, |
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