Palisades Goldcorp Ltd.
My Barber is Buying Bitcoin
I’ve been meaning to write this article for quite some time, but it wasn’t until I got a haircut last week, that I had sufficient anecdotal evidence.
Bitcoin is an incredible technology and it has also passed the test of time to prove itself as a lasting fixture in global finance. While I do not own any, I am very, very pro-Bitcoin in its potential to erode government’s monopoly on money and prevent the constant theft perpetrated by inflation.
My theoretical support above for Bitcoin sounds eerily similar to my case for gold. For millenniums, gold has acted as an inflationary hedge and as money. And for that reason, many investors have cited Bitcoin as the reason that gold is being left in the dust, going so far as to call Bitcoin digital gold.
Gold investors like to have a boogeyman. Whether it be manipulation by the banks, midnight market suppression, or now, Bitcoin, it helps to drive the narrative that someone is against them and justify why gold is not moving at the breakneck speed they believe it should. Let us not forget that gold is up 600% since the turn of the century.
Bitcoin enthusiasts love this narrative too, because it adds further justification to Bitcoin’s meteoric rise. Gold has been an established form of value for thousands of years – longer than any other asset class. If Bitcoiners can convince investors that it has replaced gold’s standing in a matter of a decade, crypto’s position of importance is justified in simple form.
With all that being said, it is my opinion that Bitcoin is not the boogeyman gold bulls are painting it as.
The crypto market is now roughly $2-trillion in size, remarkable considering it did not register just a few short years ago. Gold investors continually pit that value against a roughly $10-trillion gold market to make the case that in other circumstances – such as a world without Bitcoin – that money would have come into gold.
The reality is that there is little correlation between Bitcoin and gold. Instead, Bitcoin has been rising with all assets – all assets except for gold of late! It would make more sense to assume that the $2-trillion in crypto money has been removed from the pool of the global equities market which now exceeds $100-trillion. That narrative is not so appealing to gold or Bitcoin enthusiasts, but it is likely a far more accurate assessment.
Last week, while I was getting my haircut, my barber mentioned that he was looking to buy Bitcoin. His reasoning for it was simple – he wants to get in before he misses the next move.
I do not bring this up as an attempt to evoke the taxi-driver narrative where a misinformed person touts something at its top and I am not insinuating that Bitcoin is too expensive, or that it is not going higher.
Instead, what I am saying is that the very same phenomenon happening with equites, real estate, commodities, and nearly everything else, is happening in crypto markets. People are afraid to miss out on returns in a setting where all assets are rising. The one notable place where this is not currently happening is gold.
People may not recognize that inflation is here. Inflation may not even be registering yet in the data. But cash is in abundance, which is causing asset prices to rise. People do not want to miss out on the chance to make fast money, whether that be Gamestop, Tesla, or Bitcoin.
Investors are not uneducated when it comes to gold. But the reason for buying it is different than the reason for buying equities, real estate, and I would argue, Bitcoin. People buy gold when other things are not working. Essentially, gold is purchased out of fear, not the pervasive greed that is currently on display.
Two things need to happen for gold to really move up. One is inflation and I believe that box is in the process of being ticked. The second is a rotation of capital. When will this rotation occur? That, nobody can predict. But the velocity at which stocks are going up is directly tied to the amount of new money entering the market. And it is not sustainable at its current pace.
Even a tapering off in returns will temper the excitement. With nowhere for people to throw their money at to capture fast growth, and in light of inflationary pressures continuing, investors will retreat back to an accepted store of value that has been around for ages and that is gold.
When that does happen, Bitcoin may be at $5,000 or it may be at $500,000. None of this is meant to diminish Bitcoin’s investment case. It is simply to dispel the notion that Bitcoin’s rise is somehow gold’s demise. My barber has never owned an ounce of gold before in his life. I’d be curious as to how many Bitcoiners have held gold in their portfolio before, and for that matter how many Robinhood customers have owned gold. It’s just a hunch, but I suspect the answer would be quite small on both and quite similar.
Until next time,
Founder & Executive Chairman
Palisades Goldcorp Ltd.