It’s a matter of looking where everyone else isn’t; finding advantages to exploit on the surface of what appears to be not-so-good-news.
Here is what most people see:
Bitcoin is clearly outpacing gold and silver. Has Bitcoin become the new safe haven asset, or is it a matter of speculative mania? Are short-term or long-term investors driving up Bitcoin’s price? These are important questions to ask if you plan on making a move in either direction.
As Bitcoin broke above the $7,300 mark last week, US dollar and bond yields turning down, gold traded sideways. A peculiar move, as gold typically would have moved upward as it has been known to move inversely to the dollar; and to rise when rates fall. But in this case, gold fluctuated within a flat range while Bitcoin surged.
In short, capital flows into Bitcoin may have prevented gold’s rise; it’s price actions suggesting the possibility that people may be viewing Bitcoin to be a better “store of value” than gold itself.
Insignia Consultant’s chief market analyst, Chintan Karnani, expressed what he felt to be the popular sentiment: “Bitcoin is yet to catch up in a big way in India, China or Asia. Asians are buying gold.” In short, Bitcoin hasn’t yet caught on in the larger investor-driven segments of the world; an event that many short-term investors are anticipating; hence the flood of money into the digital currency.
Perry Woodin, CEO at Node40--a company providing blockchain services--had a similar view, one that elaborated on both short-term speculators and long-term holders: “I think there is a direct correlation between the historic surge of bitcoin this month and gold’s recent flatline...The move from gold is also a sign that investors are seeing more value in assets that can be used in everyday situations. You can buy a lot with bitcoin now; it’s much more difficult with gold.”
One the surface, sIlver hasn’t fared any better. Its coin demand has sunk approximately by 40% this year, while silver futures are up around 7%.
CME’s new Bitcoin Futures may also have something to do with this, as it signals regulatory order in what many investors saw as the Wild West of the financial markets.
Ironically, this type of banking overreach goes against the underlying philosophy of cryptocurrency enthusiasts who heralded the creation of a de-territorialized space of resistance against the monetary bureaucracy that has dominated, corrupted, and to a great extent “destroyed” the fiat currency system.
What most people don’t see:
The easy money policies that central banks across the globe have initiated to curb the impact of the 2008 financial crisis may have contributed to the loss of faith in regulated monetary systems and the rise in cryptocurrencies. Bitcoin, the biggest of them all, is in a dangerous bubble as its price, seemingly unrestrained, continues to hit new highs.
But what is backing Bitcoin besides speculative fervor and faith in its capacity to store value outside of the regulatory framework?
What happens if infrastructure were to collapse (as we saw in Puerto Rico and some parts of Texas during the hurricanes)? In such cases, can you easily pull out a bitcoin from your physical wallet, or pocket?
What happens if government finds a way to control the flow of Bitcoin?
What happens when cybercriminals evolve their sophisticated means to steal from digital wallets? Do you have the necessary expertise to navigate the digital realm to find and retrieve your assets?
Bitcoin’s existence is due in part to the digital networks that support it and people’s faith in those digital networks.
True, we live a good portion of our lives in the digital world. But in the physical world, Bitcoins have no material existence.
Bitcoin is neither backed by a tangible asset nor is it physically manifestable.
And should Bitcoin (or the crypto-infrastructure) collapse, for any reason whatsoever, gold and silver will once again reclaim their dominance, as they have done time and again.
The hidden opportunity--what people don’t see because they are too distracted by the speculative herd (similar to how Europeans went crazy over tulips in the 17th century)--is that Bitcoin’s indirect suppression of gold and silver prices = big buying opportunity.
Look at it this way:
- If you believe in the banking system and the sinking dollar of which most of the world is trying to rid itself, then stick with paper currency and everything denominated in that currency.
- If you believe in a popular currency that has no intrinsic value and no material existence, then go ahead and buy Bitcoin.
- But if you believe in sound money--what has always reasserted itself through time as the most reliable form of wealth--then buy precious metals.
The opportunity Bitcoin presents is that simple, and it’s hidden in plain sight.