I've been around enough times that whenever crypto takes a dive people invariably will come out calling it a Ponzi scheme and saying precious metals like Gold and Silver are the only way to go. I've thought they might be correct many times in the past. Now I am more in the "I can do both crypto and gold" camp. I don't think I must do one or the other. I can tell you that listening to these people whenever there has been a downturn has proven so far in every case to be very bad advice. I wish I'd not listened to them in the past. This is relevant because we are currently in one of these downturns.
I've told them that every single downturn so far since bitcoin has come out it has turned around and had phenomenal growth. I told them sure people are burned if they buy high, listen to people like them, and sell lower at a loss. Yet if they HODL (don't sell) and wait it out they have in every case seen extreme growth. I told them furthermore you can actually use returns from that profit to buy some gold and silver if that is the way they want to go. I've done a little bit of that myself.
As far as I am able to tell up until this point investing and HODL on crypto has been probably one of the best investment decisions a person could make so far in history. Up to this point. I am betting this current downturn is going to continue that cycle.
However, just so I can put some perspective on this as I've always been told Gold is a good hedge against inflation:
Let's assume I invested $10,000 in gold in 2012 at the lowest price $1537.50 because I was lucky . (This is hypothetical, I didn't do this).
If I held onto it and had it still. The at the highest price this year so far the above chart says $1,954.50. That would be a 27.12% increase in the past 9 or so years. That would make my $10,000 investment in gold worth $12,712 today.
Yet less consider that annual inflation is also usually stated to be 3% though it has been worse than that at times and it was 5% in a single month this May. Let's go off of 9 years at 3%. That comes up to 27% which does show Gold holding it's value in line with that concept of inflation. If you view the 3% as accurate that is indeed good. It is also physical so you can still exchange it without power and internet. It does have some value. That is why I hold it as well as crypto.
Now let's consider Bitcoin:
- January 2012 - 1 Bitcoin was worth $5.27
- January 2014 - 1 Bitcoin was worth $770.44
- January 2016 - 1 Bitcoin was worth $434.46
- January 2018 - 1 Bitcoin was worth $13,412.44
- January 2020 - 1 Bitcoin was worth $7,188.46
- March 2021 - 1 Bitcoin was worth $58,793.84
- Today as I write this - 1 Bitcoin is worth $35,837.44
There are dips and changes in the price with an overall rapid increase in value. Everyone of those dips had people panic selling or being convinced it was a Ponzi scheme. I have said before if it is a Ponzi scheme they are doing it wrong.
Let's consider this "Ponzi Scheme" if I had invested that $10,000 in January of 2012.
- January 2012 - $10,000
- January 2014 - $1,461,935
- January 2016 - $824,402
- January 2018 - $25,450,550
- January 2020 - $13,640,341
- March 2021 - $111,563,263
- Today - $68,002,732
If I compare that to the advice when it comes to gold vs bitcoin there is no comparison. Each time I'd see it hit a low I'd listen to the people saying it is a Ponzi scheme. I didn't HODL or go in when I should have.
It is actually worse in my case. I saw bitcoin before January 2012 and thought it had potential. I was certain the federal government would step in and shut it down. I was pretty poor at the time and my family and I would splurge on Pizza or something like that usually once a month. I remember seeing bitcoin on Pizza night and thinking that I could spend $20 on bitcoin or I could buy Pizza. I could not afford to do both. I was convinced the governments would step in and squash bitcoin so Pizza won out. Also my family would have been disappointed to miss out on splurging that month due to me seeing something called bitcoin. I am fairly certain that when I first saw bitcoin a coin was less than $0.01 per coin. I could be misremembering though and am looking into that now.
That does correspond with around the same time frame I remember hearing about it. It was indeed going for less than $0.01 in fact in this case it was actually under $0.001 but by the time I saw it, it obviously had already appreciated some and was still under $0.01.
Had I spent $20 on it when it was even at $0.01 that would have given me 2,000 BTC which today would be worth $71,674,880 for the price of Pizza in 2009. Yet you want tell me it is a Ponzi scheme and that investing in Gold would have been the better decision.
Looking at the data that turns out to have been VERY bad advice.
Now in the long run it could still prove true. Yet I've reacted in fear to that possibility during most of those dips above and I would be in very good financial position with nothing I or my family might want to do out of financial reach had I just not reacted in fear and HODL.
I feel like I missed the boat. Many people think this. They think they missed their opportunity. Yet look at that chart above. Most of us, myself included thought the same thing at EACH of those points and we were wrong. The boat still had a long way to go.
I suspect it has plenty of travel left in this boat.
I am no financial expert but I do try to learn from my mistake. I also am trying really hard to stop making ANY decisions motivated by fear.
What you do with this information is your own choice. I mainly wanted to illustrate clearly what I think of the fear, the Ponzi statements, and the people still pushing that only precious metals are the way to go.
Do you realize how much precious metal any of us could have purchased just by selling off some of our profits during this journey? A LOT.
Think about it.
Don't let fear be your motivator.
Though also you shouldn't ever invest anything you cannot survive without. Never spend what you need to survive on bitcoin or gold.
EDIT: Another thing about gold and silver. If the time comes you need to sell them someone is likely only going to give you a percentage of what the current spot value of the gold is. Thus, you are most likely going to sell it at a loss. There could be exceptions. Considering it has only appreciated by 27% or so since 2012 that is not actually a gain. You'll likely be taking a loss.
You could get lucky though.
Also looking that chart for gold prices. Some years it actually went DOWN. I can assure you that inflation never went down. It thus, doesn't actually work completely as a shelter against inflation. There is some evidence the price of Gold and Silver may be artificially being kept lower than it should be. If this is the case then we may eventually see a huge spike in value. If it is a greater spike than inflation that will be a good thing. If it just matches inflation which it has done, and in some cases failed to do then that is not good at all.
EDIT 2: If I could send myself a message in a time machine that was brief and must be less than a minute in length I'd go back to myself at that moment where I saw bitcoin and I'd tell myself to go all in and acquire as much of it as I could, sell only when I needed something, and hold it no matter what the market seemed to be doing and my family, and I would never have financial problems as well. If I had enough time left I'd say it would go far beyond that though and I might be able to help many other people. I'd say "Avoid MTGox" as well. :)