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Give the sudden jump in the price of Bitcoin over the last few days, and the less than stellar performance of gold recently, I thought this recent article by Sylvain Saurel on the 16th in Medium would be of interest to those of you with invetments on gold.
Inrecent weeks, hardly a day goes by without a renowned institutional investor joining the long list of those who advise buying Bitcoin rather than gold to hedge against the great monetary inflation we are currently experiencing.
The latest is none other than Ray Dalio.
Ray Dalio hasn’t quite embraced Bitcoin yet, but he is now recognizing that Bitcoin is an attractive alternative to gold. In an AMA (Ask Me Anything) session on Reddit, Ray Dalio surprised everyone by starting like this:
“I think that Bitcoin have over the last ten years established itself as interesting gold-like asset alternative with similarities and differences to gold and other limited-supply, mobile (unlike real estate) storeholds of wealth.”
He then went on to say that Bitcoin could be used to diversify from gold:
“So Bitcoin could serve as a diversifier to gold and other such storehold of wealth assets. The main thing is to have some of these type of assets (with limited supply, that are mobile, and that are storeholds of wealth), including stocks, in one’s portfolio and to diversify among them. Not enough people do that.”
As you can read, Ray Dalio has not yet fully embraced Bitcoin as Paul Tudor Jones or Stanley Druckenmiller did before him. Nevertheless, it is an interesting first step for someone who still advised against buying Bitcoin a few weeks ago.
In time, Ray Dalio will eventually advise opting for Bitcoin instead of gold. Others will follow. The success of Bitcoin is inevitable. It must be said that Bitcoin has several very important advantages over gold.
First of all, Bitcoin is much scarcer than gold. Bitcoin is more portable. You can carry your Bitcoins with you anywhere in the world in a very discreet way. All you have to do is memorize the 24 words of your seed phrase.
Try to move around with gold, and you’ll be in for a nasty surprise when it comes time to go through customs.
Gold can be counterfeited more easily, and it is more difficult to recognize the authenticity of the gold. For Bitcoin, it’s a no-brainer. The durability of Bitcoin is much better as well. Finally, Bitcoin’s divisibility is an incredible advantage that makes it accessible to hundreds of millions of people who have always been excluded from the banking system.
Bitcoin is divisible up to eight digits after the decimal point. Anyone can buy Bitcoin on Earth as long as they have a smartphone and an Internet connection. This applies to more than 60% of the Earth’s inhabitants. Gold is reserved for the elite.
However, there are two even more obvious reasons why you should buy Bitcoin rather than gold.
The first is related to the limited upside potential of the price of gold. Gold has been a recognized store of value for centuries. Its market cap reached $9T this year. An ounce of gold broke a record in the summer of 2020 by exceeding $2,000 for the first time in its history.
Based on this premise, the earning potential by buying gold is more limited than by buying Bitcoin.
Starting at the current price of $19K, the Bitcoin price can legitimately show a 25x gain over the next decade, as the Winklevoss twins have recently called it. The market cap for Bitcoin is only $350 billion. This is insignificant compared to the market cap for gold.
So the upside potential of the Bitcoin price makes it a better option right now. With Bitcoin, you will protect your wealth from the endless inflation of the U.S. dollar. But even better, you will see your wealth in the U.S. dollar increase mechanically due to the demand for Bitcoin that will continue to grow in the years to come.
As far as gold is concerned, you will notice that it is difficult to buy it without going through companies that will keep the gold you buy in vaults for you.
Thus, you are subject to the risk of confiscation of your gold. Do you think this cannot happen? Actually, it has happened in the past. To finance his New Deal policy, President Franklin D. Roosevelt signed Executive Order 6102 on April 5, 1933.
In the midst of the Great Depression, the U.S. government, through Executive Order 6102, demanded the surrender of a large portion of the gold held by private individuals. Tens of millions of individuals were robbed of part of their wealth by the arbitrary decision of a single man.
The Gold Reserve Act signed on January 30, 1934, further reinforced this prerogative of the American government. Immediately after this law, President Roosevelt changed the legal price of gold from $20.67 per ounce to $35. This sudden price change prompted all gold mines around the world to increase their gold production.
This increased gold exports from overseas to the United States. The Gold Reserve Act resulted in a large accumulation of gold by the Federal Reserve and the U.S. Treasury. It was at this time that the bullion depot was built at Fort Knox.
The rapid increase in gold reserves and the parallel devaluation of the U.S. dollar against gold made it possible to massively increase the money supply, which was not normally possible due to the gold standard system that was in force at the time. This increase in the money supply made it possible to lower real interest rates.
This in turn increased investment in durable goods, which had the effect of stopping deflation. As you can see, the desire to increase the money supply irrationally is not new. Even during the gold standard system, politicians found shenanigans to achieve this.
Here, the subject is elsewhere, since I want to make you aware that by putting your wealth in gold, you risk having it confiscated at any moment by a decision of your governments. This is a risk that you probably cannot take.
It is in any case something that I do not want to risk personally. As far as gold is concerned, I would like to emphasize what should remain as a rule in your mind:
Not your Vault, Not your Gold.
If you do not have actual possession of the gold, you are at risk. And since owning gold in large quantities is complicated in terms of storage, you have to find a better solution.
That better solution is Bitcoin. Whether you store 1 BTC or 100 BTC, it makes no difference. You only need to remember the 24 words associated with your seed phrase to retrieve the private keys associated with your BTC.
The first of the Ten Commandments of Bitcoin is the following:
Not your Keys, Not your Bitcoin.
If you respect this command by owning the private keys associated with your BTC, then your wealth will be protected from confiscation and censorship by the powerful at the head of the current monetary and financial system. You will be in complete control.
You will be able to live your life on your own terms by protecting your wealth from the ravages of monetary inflation. This is what Bitcoin is all about. In this area, gold cannot fight.
By buying Bitcoin instead of gold, you are choosing the world of the future.
A world of the future where the people will have control over money. A world of the future that will be more inclusive and better for more people. Sooner or later you will join the Bitcoiners who understood this before anyone else.
Your entry into the Bitcoin world is only a matter of time. See you soon on the other side.
