Alternative Investments

Why You Should Own Both Gold and Bitcoin

Editor’s Note: Today, Rich Checkan, president and chief operating officer of Asset Strategies International, is here to explain why you should own both gold AND Bitcoin.

Though these assets have many similarities, they are ultimately different investments that do different things for your portfolio.

Read on for Rich’s insights…

– Kaitlyn Hopkins, Assistant Managing Editor


When it comes to Bitcoin and gold, you don’t need to choose one or the other. I suggest you choose both.

Don’t fall for catchy marketing gimmicks that suggest it has to be one or the other… like this one from the Grayscale Bitcoin Trust…

Video

Grayscale Investments – Drop Gold Commercial

My good friend Mark Skousen sent this to me after watching me debate Bitcoin versus gold at a live conference in Las Vegas last November.

And this ad is as clever as it is preposterous!

The suggestion is that gold is clunky and hard to deal with, so, since Bitcoin serves the same purpose, just replace all your gold with Bitcoin.

The only catch is they do not serve the same purpose. They are two different investments that do different things for your portfolio.

It’s All About Credibility

When he sent me the ad, Mark suggested that Bitcoin knows its competition. But I think it is something else entirely.

The “gold standard” is a very real thing. After all, gold has been performing its function well for more than 5,000 years. It is a store of value (purchasing power), in a highly liquid form, for a potential financial crisis you hope you never have.

Bitcoin wants to be that too. So if the marketers can convince you Bitcoin is the “new gold,” it has instant credibility.

But that’s like me saying my golf game is like Tiger Woods’ golf game. No matter how persuasively I say that, unless it is true, they’re not going to allow me on the PGA Tour, and they’re certainly not inducting me into the World Golf Hall of Fame.

I don’t know the future. Bitcoin may someday evolve into the “new gold.” But, at the ripe old age of 12 (as of January 3), Bitcoin has not matured enough as an asset to make such a claim.

Check back with me in a little more than 4,988 years.

This is what Bitcoin has done since a few years after inception…

Bitcoin Chart

Play Your Part

I own both gold and Bitcoin.

I’ve owned gold for decades. I’ve owned Bitcoin since the summer of 2015 when it was just above $2,000 per unit.

I’m not delusional. When I look at that chart above, I do not see a stable store of purchasing power. Rather, I see a potentially very lucrative speculation.

Thus far, I have been rewarded for that speculation to the tune of around 1,500%.

I love the profits Bitcoin generates, but looking at the trajectory of the spikes, I am fairly certain they cannot last. And, thus far, they haven’t.

We have seen Bitcoin fall from $20,000 to $3,500 in a very short amount of time. That’s a drop of more than 82%! On January 11, we saw a one-day drop in Bitcoin of 20%!

Stability is not the word that comes to mind here.

Speculate in Bitcoin. Bank those profits in gold during these spectacular bouts of appreciation. This way, you store the purchasing power earned by speculating in the world’s only real money…

Gold.

Of course, speculation suggests a small allocation – 1% to 2% tops – with money you can afford to lose.

Consider banking Bitcoin profits in gold initially. The Oxford Club suggests 5% in gold and other precious metals as wealth insurance, so above that figure, consider allocating to stocks, bonds and precious metals for profit.

Something to Consider…

I recently met a Bitcoin zealot who said something that surprised me. He told me, “You are my favorite gold dealer because you are the first gold dealer I’ve met who liked Bitcoin.”

I am not surprised, however, by the fact that Bitcoin is gaining favor with investors and institutions.

Bitcoin and gold benefit from a lack of confidence in fiat currencies.

Governments and central banks worldwide have been mismanaging fiat currencies throughout history. No fiat currency to date has survived for 5,000 years as gold has. Since the creation of the Federal Reserve in 1913, the U.S. dollar has lost 97% of its purchasing power.

And, after wholesale shutdowns of global economies, they have taken currency mismanagement to a new level. They have drastically increased the money supply. For the U.S. dollar, the increase was 25% last year alone!

This monetary expansion is simply a dilution of the purchasing power of each and every dollar, euro, yen, etc., in circulation.

When confidence erodes, alternatives are sought. Precious metals and cryptocurrencies are the beneficiaries of this eroded confidence.

Both should benefit from continued currency mismanagement.

But don’t be fooled into thinking you have to own either gold or Bitcoin. That is sheer nonsense.

Own both. Just understand the roles Bitcoin and gold play. Allocate accordingly. And then sleep peacefully at night.

Good investing,

Rich

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