Whether or not you’re more enthusiastic about investing in tangible assets or cryptocurrency, one thing is for certain: government sanctioned fiat currency is in trouble.
Since early 2017, Bitcoin has risen in price from less than $1,000 to nearly $20,000. Those returns would make any investor smile. Many crypto supporters think gold is obsolete. Some gold bugs shun the crypto craze as the latest fad. Mike Maloney thinks they’re both wrong. As he points out in his new episode of Hidden Secrets of Money, which follows his three-year journey into investigating the cryptocurrency field, he expected to find nothing but a digital payment system. Instead…
“What I found is a technology that can revolutionize the planet.” -Mike Maloney, HSOM 8
But the crypto craze has raised some questions and concerns, especially as it relates to gold and silver. Here’s a brief Q&A to the most common topics we see come up…
Cryptocurrencies offer users another way to opt out of the current monetary and banking system, and that can be enticing. The technology is also exciting, especially for those that are more techno-savvy.
The more recent reason for their popularity, of course, has been the surge in prices. Some people have become millionaires from their early investments, and that has spurred others to get involved, driving up the price and the number of cryptos in existence. Many people choose to invest in bitcoin for the same reasons they invest in gold and vice versa. Bitcoin and precious metals share many of the same appealing characteristics:
As Mike says…
“The reason people buy bitcoin and cryptos is the same why people buy gold and silver. It’s an alternative to all the fiat currencies that are being printed into oblivion on this planet right now. And they eliminate the need for third party trust—you don’t have to trust somebody else with your bitcoin, you’ll only have to trust yourself. You don’t need to trust somebody else with your gold and silver, you have to trust yourself. So the reasons are the same.”
They’re also both outside the banking system (though that would change if banks adopt the technology).
In October of 2008, an unidentified person- or perhaps group of people- using the alias Satoshi Nakamoto published a whitepaper detailing a new form of currency. They called it Bitcoin. Less than a year later, an open source software was released to the public in 2009.
Nakamoto’s whitepaper identifies a clear problem with the world’s current monetary system:
Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model. Completely non-reversible transactions are not really possible, since financial institutions cannot avoid mediating disputes. The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for non-reversible services. With the possibility of reversal, the need for trust spreads. Merchants must be wary of their customers, hassling them for more information than they would otherwise need. A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party.
Satoshi makes the argument that:
What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party
Cryptocurrencies like Bitcoin allow people to transact with each other, using the internet, anywhere on earth.
When Nakamoto introduced the concept in his 2008 whitepaper, he wrote:
A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending. We propose a solution to the double-spending problem using a peer-to-peer network. The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work. The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power.
In December of 2017, we released the eighth episode of The Hidden Secrets of Money titled From Bitcoin to Hashgraph: The Cryptocurrency Revolution. In this documentary, we follow Mike Maloney over the course of several years as he learns about Bitcoin and the technology behind it.
Watch the video below:
Instead of having an account number like a checking account or credit card, cryptocurrencies are much more secure because they have a public key, and a private key. It’s like having two account numbers… one for deposits… and another for withdrawals. You’ll often see them displayed as a string of characters, or as a scannable code. This level of security means that you could put your public key on a billboard if you wanted to and your funds would still be secure. The only thing other people can do with your public key is to send funds to you. It is your private key that gives you access to your funds. As long as you keep control of your private key your funds are absolutely safe, and theft and fraud are virtually impossible. But just like cash in your wallet, you need to keep it safe to prevent it from being stolen. Its security is entirely your responsibility.
Cryptocurrencies can also give you privacy. Just like cash, you don’t have to disclose any personal information when you spend them. By contrast, a credit card has your account number, name, and expiration date (these act like a public key), - but the equivalent of your private key - your signature and security code - are displayed in plain sight.
The bitcoin private key is comprised of 51 alphanumeric characters, making the currency much harder to crack than something like a credit card. An effective means of storing this key is through a digital wallet. The software creates a digital signature that ensures the transaction cannot change once it is broadcasted.
All of these features make cryptocurrency infinitely safer to use than cash or cash equivalents.
Private keys can also be stored on a paper wallet, which is an offline mechanism for storing Bitcoins where the private key and QR code are printed onto paper. While paper wallets don’t carry any risk of cyber attacks or malware, the safety and security of the physical document is key to keeping your account safe. It is ultimately the decision of the investor on whether or not they would find a digital or paper wallet more effective for their storing needs.
Bitcoin is a new currency that can be used to purchase merchandise anonymously. Transactions are made with no middle men, meaning no banks or Federal Reserve. Right now, Bitcoin can be used to book hotels on Expedia, buy furniture on Overstock, and even invest in physical gold and silver. Bitcoin will be able to pay for more and more goods and services as large companies embrace the currency. However, it is too early to tell if the currency is money because the purchasing power is so variable with the rise and fall of coin prices.
Price per Unit
$14,105 per coin
$1,294 per ounce
Mining bitcoin involves using computers to solve complex math problems. The computer that solves the problem first is awarded a small amount of bitcoin as a prize to incentivize people to continue verifying transactions.
The supply of gold is dependent on the amount mined out of the earth’s crust. The amount of gold that exists is finite, and the supply is steadily falling.
Bitcoin is capped at 21 million units. That means as bitcoin continues to be mined, it becomes more challenging to generate more.
Estimates for the amount of gold that exists in the world range from 165,000 tonnes to 2.5 million tonnes.
|Tie. Both are finite.|
Although many believe Bitcoin and other cryptocurrencies to be anonymous, this is not the case. Your public key is exposed and can be used to identify you.
No one ever has to know that you own gold.
Bitcoin is stored in a digital wallet or as code on a private hard drive. It is estimated that 30-50% of Bitcoin ever mind has been lost forever.
Data is accurate as of 12/28/17
We don’t like giving investors personal advice, but we are happy to share what we’re doing.
No, we are not buying bitcoin right now. It’s clear the price of bitcoin is in a bubble, and a sure way to get hurt is to chase an asset that’s in runaway mode. In fact, Mike has been selling some of his bitcoin to buy gold and silver. That’s because cryptos are overpriced and precious metals are underpriced.
Because of gold’s role as money throughout history, and due to the elevated risks inherent in the financial system right now, we’re convinced the next big asset bubble will be gold and silver. Mike feels no differently than he has all along:
There will be a monetary reset, and gold and silver will soar in that turbulent and scary time. This monetary shift is not far off.
If you don’t have a meaningful portion of your assets in mankind’s oldest form of money, we highly recommend you follow our lead and buy gold now.
Bitcoin is officially the biggest asset bubble in recorded history. No bubble has lasted forever. This is not our opinion; it is a well-documented historical fact. What we don’t know is how high the price of bitcoin will rise in the meantime, how far it might fall, nor when all this will happen. But it’s probably not too far away, given the mania type rise.
Frankly, the crypto markets remind us of the Nasdaq in 1999. Dot-com stocks were all the rage; prices rose exponentially, and many had no earnings. Stories abounded of people quitting their jobs and taking out home equity lines to trade tech stocks. These same things are happening today—which should serve as a word of caution.
It is probably not a good investment strategy to chase an asset that’s in a bubble. There will be opportunities to invest in the crypto sector in the near future, so for now we recommend focusing on your education of this growing sector. One advantage to buying gold now is that when crypto prices do crash, gold can serve as a buffer against that event, just like it has against stock market crashes. Bottom line, gold should be seen as a strategic asset that can weather whatever storm is coming.
Crypto currencies certainly have a place in the future, but right now the mania attached with the market makes them an investment to steer clear of, until there is a correction and prices level off. One of the most important investment fundamentals is to buy low and sell high, and the current market would have the bitcoin trader buying at an all-time high.
As Mike states in the eighth episode of the Hidden Secrets of Money:
“I look at the cryptocurrencies as a very speculative, volatile, and potentially risky play. I look at gold and silver just like savings—I see them as something that has never failed in 5,000 years. They are proven. They are also extremely undervalued compared to the morass of fiat currencies around the world right now.”
If you’re ready to swap out some of your crypto gains for physical gold and silver, you can pay for your purchase with bitcoin.
Whatever your opinion of cryptos and gold, Mike encourages everyone to investigate both. That’s because both are likely to play a big role in your future.