Drop Gold, Buy Bitcoin?

The cryptocurrency company Grayscale has launched a multi-million dollar marketing campaign imploring investors to drop gold and buy bitcoin. It is a slick video and the campaign is getting plenty of attention, but does it make any sense?

The “Drop Gold” campaign kicked off Wednesday and features a 39-second commercial that shows a man and woman who race frantically around a financial district while people around them are weighed down by bulky gold. It asks: “Why did you invest in gold? Are you living in the past?”

The ad says that “gold shouldn’t weigh down your portfolio.” But that doesn’t make much sense.

Sure, you can cherry pick dates when gold was down while stocks went higher. But if we go back to the start of 2000, the gold price is up 348%, while the S&P 500 is up just 102% in the same time period.

How exactly is that “weighing down your portfolio?” Gold has outperformed stocks by a factor of more than 3 times! If that is what Grayscale calls weighing down your portfolio, I’ll take some extra weight, please.

Furthermore, gold is an insurance policy for your portfolio and hedge against financial uncertainty. It has maintained its value for thousands of years, while fiat currencies consistently lose their value and usually implode.

The image below shows the purchasing power of the U.S. dollar over time. Since the creation of the Federal Reserve in 1913, the dollar has lost over 95% of its purchasing power.

Gold hasn’t lost any of its purchasing power over time.

Which begs the question… Shouldn’t Grayscale be advocating that investors dump fiat funny money and purchase cryptocurrency? Or dump assets that are in bubble territories, such as stocks, bonds, ETFs and real estate?

Wouldn’t it be better to dump depreciating assets than something like gold that has gone up 350% in the past 20 years? Sure, Bitcoin has outperformed gold by a wide margin since it was launched, but gold has been the better performer over the past year. The point is that when looking for assets to dump, there are quite a few worse-performing assets to toss before selling gold.

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Disclosure: Long gold, long Bitcoin, short the bankers.

Disclaimer: I am not an investment advisor. This is just my personal opinion. Invest at your own risk.

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Currency Trader 1 year ago Member's comment

#Bitcoin is the new gold!