Gold And Bitcoin Have Two Completely Different Functions – Mike Swanson (04/19/2021)

We are at a key moment for gold and silver where both are starting a new rally. Gold formed a double bottom in March and turned up last week when it closed above its $1750 resistance level. I believe it’s setup now to rally for months. It’s early enough in the rally that one still has a window of time to buy, but that window is likely to slam shut fast. At the same time many people have lost interest in gold in the past few months as it was in a downtrend/consolidation phase and had their attention drawn to Bitcoin, which put on a strong rally along with the US stock market since the November election.

Bitcoin is not a replacement for gold and silver. Do not buy Bitcoin for the reasons you would buy gold or silver or mining stocks as it has a completely different function in the real world than precious metals do. Precious metals act as a store of value for people with a lot of money who want to preserve the value of their money from the impact of inflation. People who buy Bitcoin are not buying it do that, but in order to speculate on higher crypto prices – and for no other reason.

The reality is most Bitcoin players are playing it with a small amount of money and buying via apps on their phone. Someone who goes to a bullion store and buys $50,000 worth of gold is not looking to trade in and out of physical bullion. These are two different types of people with different reasons for what they are doing and completely different worldviews.

Despite that Bitcoin, promoters are trying to claim that Bitcoin is a safe haven from inflation or stock market turmoil when it is not. I did a video update last Thursday about the gold and silver rally and a new trade I put on in my little Robinhood Account I show people, but in the last 1/3 of the video I went through the charts that show that Bitcoin has ZERO relationship to the US dollar and none with inflation.

The only reason to buy Bitcoin is to try to make money off of Bitcoin price movements. If you have a system for doing that then more power to you, but Bitcoin is useless as a long-term investment as a “safe” asset allocation for something that does not trade with the stock market or can go up when the US dollar goes down. It is a pure instrument of speculation that is the equivalent to buying calls on the Nasdaq 100 or calls on TSLA.

If you think doing one of those two things is a good thing to do now then consider Bitcoin to be a good bet to make.

However, if you want to buy something to protect yourself from inflation and a falling dollar in the coming years then gold is the simplest instrument to use to do that.

Crypto currencies and precious metals have two completely different functions in a trading account or portfolio.

And that’s reality. It’s not me saying that, or some guru, but it’s the facts of pure math.

-Mike



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