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Precious Metals are Solid Assets, Cryptocurrencies are Not! | https://www.themorganreport.com
I remember when Bitcoin was released in 2008/2009. I was quite aware of this new alternative asset at that time. Around that time, we saw a huge bull market in precious metals, which faded by 2012.
I noticed the interest in bitcoin came from people who had made good gains in silver or were late to the party. It took people away from the silver market and into the cryptocurrency world. I have friends all over the industry worldwide, who are on the wholesale side, and on the retail side. Some on the retail side are some of the biggest well-known internet names in the precious metals industry. When I get information from them, it holds a lot of clout, because they deal with millions of dollars on a monthly basis.
A lot of them reported that silver investors were coming in with monster boxes and cashing them out and moving into bitcoin. I remember when it first occurred. I thought it was just a small percentage of people, but it was a lot bigger than I initially thought. Some of those people did so well in the crypto world, they’ll probably never come back to silver. Some will play both.
My main tenant is based on a historical timeframe. Bitcoin has been around approximately a decade. Gold and silver have been around for thousands and thousands of years, and have been coveted as money of last resort, honest money, and more. No matter what technological advancements transpire, that perception is not going away.
Nature preaches balance. It’s very unusual to see all the types of gains experienced in cryptocurrency––particularly, bitcoin––although they have occurred in history. I did a lecture at the Vancouver Resource Investment Conference on Bitcoin versus the Tulip Bulb Mania, a period in the Dutch Golden Age during which contract prices for some bulbs of new and fashionable tulip went hyperbolic and then dramatically collapsed in February 1637. Bitcoin traded at $4,000-$5,000 back then, and I called it correctly. The price of Bitcoin had a long way to go, even though it had made a new high. I based that on the volume behind it.
In 2017, a few days before the absolute peak in Bitcoin, I made the call: the top is near. And that’s when you want to make that call. You want to sell into strength. You want to sell a stock, commodity, house, car––whatever you have––when there’s a big demand for it, and everybody wants it. You don’t want to sell it when that last bid is $1,952.12 for an ounce of gold, and there’s only one person that wants to pay that price. By then, the markets are drying up. That’s how markets move. You want to sell into strength. Bitcoin looked toppy to me at $17,000.
After that, when I made my appearance at Anarchapulco, a thirty-something man came up to me and said he had heeded my advice and cashed out at $17,000 or so and moved back into the silver market. At that time, everyone was claiming it would go to $50,000. Not me. It had been too parabolic for too long. And, being a contrarian, when everyone is saying it’s going to $50,000, and it’s at $17,000, it’s a good time to take some profit––maybe sell half of your position.
But, it’s not all about calling tops. It’s about what is the right asset class. And, just because it performed so well during that time frame doesn’t necessarily mean it will repeat. People that are in the bitcoin space don’t like to hear that. I was there when I saw silver go from $6 to $50 bucks in a year in 1980. I saw it go for eightfold in one year’s time. It took silver from 1964 to 1979 to get to $6 from the monetary value established by fiat of $1.29––15 years. In one year, silver increased 850% from $6 to $50. So, I’ve seen parabolic moves. After that, the silver market was flat for 20 years.
I am not saying Bitcoin will remain flat. Since its peak, it’s already made some breakouts. Rather, my point is that it’s a market. There’s an automobile market, a lithium market, a gold and silver market, a stock market, a commodity market, an oil market, etc. And just like those markets, bitcoin is a market. And markets have certain behaviors, especially if they’re left alone and the free market is able to determine the prices.
Cryptocurrency had a bigger impact on the silver market than I initially thought. There are people that are done with silver. In the next few years, you’re going to see a big resurgence in both precious metals; in particularly silver. I still expect silver will outperform gold in this next move up, which will be taking place and will continue for the next three or four years.
People have a right to choose whatever alternative currency they want. They can hold cryptocurrency only, precious metals and cryptocurrency, or whatever. The vast majority, of course, will follow the herd, and the herd is bank with your friendly banker down the street. That’s the safest place to be, which of course is far from true. But, that’s the belief system in the current paradigm.
If cryptocurrency holders are going to make a purchase––real estate, Tesla, another stock or another crypto––selling into cash makes sense. But, if I am looking to put money from cryptocurrency gains into savings, I am going to move it into precious metals. I don’t want to hold my savings in the fiat system for very long, although the U.S. Dollar is still king, and the system has yet to crater.
If you’re going to save in a 5-10 year timeframe––or maybe even longer depending on your age and your goals and what your thoughts are on money––you might want to put it into precious metals for savings. If you want to spend it, that’s fine. You’ve got to put it in a Fiat system. There’s not that many transactions that are done in just gold or silver, although they do occur.
But, when you compare cryptocurrency and precious metals, one big difference pops out at me. Precious metals are solid assets. Cryptocurrencies are not. In the event of an EMP, a power failure, the internet goes down, your phone doesn’t work, something’s blocked, cyber warfare, you could go into a shop or a friend’s place with a piece of metal, and, potentially, make a transaction. Whereas the other means of payment are dependent on the digital space. If you don’t have an internet connection, all the sudden cryptocurrency becomes less practical. I’m not saying such things will occur, but they could.
A precious metals aficionado with degrees in finance and engineering, David Morgan originated The Morgan Report, a monthly report that covers economic news, the global economy, and to make substantial capital gains by investing in the Resource Sector. The Model Portfolio covers top-tier, mid-tier, speculative and special situations.
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