History has many lessons to teach us. Take the Spanish dollar as an example. The first recognized global currency, known popularly as “pieces of eight,” was valuable because it was widely accepted around the globe. It maintained its popularity for three centuries.
Silver itself had no practical use in the 17th Century, when the Spanish dollar first made its appearance on the scene. It was rare and difficult to mine, therefore it had value. Sound familiar? It should. We could easily use the same description for Bitcoin (BTC).
Gold, the most common precious metal investment, followed a similar but shorter path to popularity. It was a common medium of exchange in the 19th Century and a standard for multiple world currencies until the middle of the 20th Century.
The iShares Silver Trust (SLV) opened at $25.12 this morning. It’s been hovering around that level since August of last year, when investors scrambled to use it as a “safety net” against what they believed was going to be a global economic crash. In March 2020, it was at $11.62.
One of the popular arguments for investing in silver is that it doesn’t fluctuate in value at the same rate as the overall stock market does. It’s also considered “Inflation-proof” since its price is based on perceived value, supply, and demand. Again, sound familiar?
Overlay a performance graph of the Dow Jones over the past year’s performance of iShares Silver Trust. The patterns are almost identical. Do the same with Barrick Gold (GOLD) and you’ll see a similar pattern. Lows in March. Peaks in November. Moderate 12-month gain.
It’s no secret that Bitcoin’s increase in value was truly historic this past year, yet there are still those who believe it’s too volatile to be the same “safe haven” that gold and silver have been during times of market volatility. Those folks are wrong.
Gold has a volatility rating of 10% to 20% during normal times, but that rating has spiked as high as 60% during a financial crisis. Silver has an average volatility rating of 38.4%. The current volatility rating of Bitcoin is 5.03%, with a 12-month high of 10.98% in April 2020.
Numbers don’t lie. They’re not opinions or market ideologies. They are the basis of evidence-based decision making. Personally, I’d like to believe that most investors at least look at the numbers before buying and selling on trading platforms. Unfortunately, many do not.
The Spanish dollar had a nice run. Three centuries. The gold standard led to the rise of the US dollar as a worldwide economic influencer. Bitcoin (BTC), strengthened by endorsements from PayPal and now Tesla, is well on its way to becoming the next truly global currency.
Sound crazy? I’m betting on it. PayPal (PYPL) is up 57% since announcing they’d be supporting Bitcoin and other cryptocurrencies starting in 2021. Tesla (TSLA) dropped 6% this week as investors digest their $1.5 billion Bitcoin purchase. That’s an opportunity to buy.
As for my recommendation in the article “Chips and Dips” to shift tech-stock dollars into Bitcoin, the Invesco (QQQ) ETF, which tracks the top one hundred Nasdaq stocks, is up 1.10% this week. Bitcoin is up 12.42%. That’s a win in my book.
Another recommendation I made last week was to liquidate retail investments and invest that money into Bitcoin. The SPDR S&P Retail ETF (XRT) was stagnant last week, showing a small gain of just 0.11%. I’m expecting it to go into downtrend soon.
Precious metals have long been used as a hedge against market volatility. Clearly, Bitcoin is now a better option. Will this last? Recent developments indicate that it will. I’ve already started making adjustments to my portfolio to prepare for expected market volatility this year.
I’m looking at this as building a “war chest” for upcoming IPOs and opportunities to buy dividend stocks that bottom out later this year. I could simply liquidate potential losers to cash, which would be safe, but I sincerely believe that I’ll lose money if I do that.
Coinbase is going public via direct listing, democratizing their offering. I want in early on that. Bitcoin gains from 2020 will finance the purchase. For dividend stocks, I’m waiting on Lumen Technologies (LUMN) to drop below $10 again. I’ll buy that with Bitcoin gains also.
For my day trader friends, check out the chart patterns on Texas Instruments (TXN). I’ve been picking up quick hits on their volatility for a while now and the semi-conductor shortage will cause additional movement in Q2. I’m also looking at them as a long-term investment.
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