I've been playing poker recreationally for the past twenty years, and recently I went to my local poker room and was a winner. Let me be clear: I've won in the past, but in hindsight, my previous wins were mostly due to luck. A few days later, I came back and won again, which surprised me! Now, my poker ego is fired up, and I'm looking forward to playing again in the coming weeks.
I attribute my recent success to listening to three hours of poker strategy podcasts. Some of the things I heard in the podcasts were things I already knew: playing strong hands, sometimes you have to fold good hands, and being on or closer to the (dealer) button improves your odds. However, after listening to these podcasts, I made some adjustments to my games, such as raising more often before the flop, always c-betting, and looking for patterns in player types.
I was amazed at how a few hours of listening to a casual poker expert beat hundreds of hours of poker playing. If you are or have ever considered investing in gold, my goal is to provide you with an extra incentive to invest in Bitcoin. If you see value in gold, there is a 95% chance that you will see value in Bitcoin, and I hope to provide that extra 5% here.
Why does investing in gold make more sense than investing in Bitcoin?
Before Bitcoin, owning gold was a smart investment. It diversifies a portfolio, protects against currency debasement and inflation, and allows for self-custody of wealth, reducing counterparty risk. For example, if you own and store gold, and a bank closes or goes bankrupt, you still own your wealth. No institution can prevent you from accessing your wealth stored in gold.
Additionally, gold has a long history and has maintained its value almost universally over the centuries, during which time fiat currencies have depreciated to zero, while gold has maintained its purchasing power. For some people living in countries with hyperinflation, gold is often the best way to preserve and protect their wealth.
Many financial advisors recommend allocating 5-10% of a portfolio to gold. The gold ETF GLD was launched in 2004, adding billions of dollars of liquidity to the gold market. In the following eight years, gold experienced a massive bull market. During the 2008 financial crisis, gold outperformed most assets, making many people rich.
Why is Bitcoin not as dazzling as gold?
Bitcoin offers many of the same benefits as gold – portfolio diversification, a hedge against governments’ inability to responsibly manage their budgets (leading to national debt, inflation, and currency debasement), and everyone can own and keep Bitcoin. You don’t need a bank or exchange to access, store, or send your Bitcoin.
If Bitcoin solves many of the same problems as gold ownership, then why has Bitcoin outperformed gold so much over the past decade? First, I will share with you the reasons why Bitcoin is a superior store of value to gold, and then I will explain why Bitcoin's value will continue to outperform gold's gains.
The fundamental reasons why Bitcoin is more worth owning than gold:
Bitcoin is exponentially more divisible. Each Bitcoin can be divided into 100 million units, called Satoshis. At the same time, each ounce of gold can be divided into grams. There are 453 grams in 1 pound. Therefore, the smallest denomination of gold is worth about $86, while 1 Satoshi is currently worth $0.00064.
If you buy or sell physical gold, expect to pay high fees in both directions. Additionally, if you own a large amount of physical gold, you may need to pay someone else to store it, which can cost at least 0.5% per year. Unfortunately, you sacrifice security while taking on additional counterparty risk. Meanwhile, Bitcoin can be kept indefinitely in a digital hardware wallet, typically for a one-time payment of $100 to $400.
The total supply of Bitcoin (21 million Bitcoins) is known, while the total supply of gold is unknown. Bitcoin's current inflation rate is 0.84%, and it is only going to go down. As the price of gold increases, gold miners can find ways to mine more gold. It is also possible that there are large deposits of gold that we don't know about right now.
Bitcoin can be transported and is easily verifiable. Try traveling with large amounts of physical gold. 1) It's unsafe; 2) It's usually illegal and needs to be reported if it crosses a border; 3) It's heavy and bulky, limiting how much you can carry. Also, gold is relatively easy to counterfeit. Here's a story about 83 tons of gold being found to be painted copper: China's Biggest Gold Fraud, 4% of Gold Reserves May Be Fake: Reports. Don't worry about these issues with Bitcoin.
Bitcoin is easier to spend. While buying coffee is inefficient right now, 15,000 businesses around the world accept Bitcoin. If you take a step and learn about decentralized finance, you can get a mortgage with Bitcoin in minutes. Meanwhile, no legitimate business accepts gold for the reasons mentioned above.
Smart Reasons to Own Bitcoin Instead of Gold
Now that we’ve concluded that owning Bitcoin is a better way to self-custody wealth than owning physical gold, let’s explore why the price of Bitcoin will continue to outperform gold over the next decade.
The price is going up. Compared to gold, Bitcoin has done amazingly well. Even if you bought Bitcoin at its highest price every year for the past five years, it would have outperformed buying gold at its cheapest every year.
Money flows and momentum. Money is moving from gold to Bitcoin. This shift is because speculators are looking to gain greater returns on their investments, and as more wealth flows to younger people, we should expect Bitcoin to gain more market share.
BTC ETFs are breaking records for inflows. As expected, funds are leaving gold ETFs. Verify for yourself here: https://www.gold.org/goldhub/research/etf-flows.
Manipulation. Several banks, including JPMorgan Chase, Barclays, and Bank of Nova Scotia, have been fined for manipulating the gold market. Investing in an asset that a bank has a history of controlling doesn’t sound ideal.
Bitcoin has a dual narrative. The banking crisis last March reflected Bitcoin’s value storage story. At the same time, Bitcoin also has technical attributes that can easily be combined with hot topics such as artificial intelligence. Try using physical gold in a digital world.
let's move
I am not saying that if you are a "gold bug" you need to sell all your gold and move it into Bitcoin (although that may be a wise idea). However, I am asking you to consider moving some of your gold investments/holdings into Bitcoin, a far superior asset.
If you are considering investing in gold but haven’t yet, I would like to ask you to think further about your argument. What can gold offer you that Bitcoin cannot?
I own Bitcoin and a Bitcoin ETF. This information should not be considered investment advice. I am no more qualified to give financial advice than I am to dance ballet. Digital assets such as cryptocurrencies and NFTs involve risks, so you should do your due diligence before investing.
