Cryptocurrencies. Interesting? Yes. But They Are Not Gold

OWNx Team Money & Financial Technology

The hype is on. Ethereum and Bitcoin are catching the eye of a wider audience as their prices have risen to new levels. This rise, however, has been accompanied by significant volatility–not the kind of stuff most investors want to deal with.

Even though Bitcoin has been around since 2009, it has only become a relevant player in the currency world over the last two or three years. Some would argue that it still hasn’t gained relevancy.

Regardless, reality is we’re still in the very early stages of a global monetary revolution. That means it’s going to take years for the market to sort out who will be the long-term players in this newly emerging system. There will be spectacular successes, and there will be spectacular failures.

The first products to market (Bitcoin) do not always mean success. Remember the Palm Pilot? In 1997 it was the personal digital assistant. What about Friendster? Maybe you didn’t even know about them. They launched a year before MySpace in a market now dominated by Facebook.

The point is, as many raving fans as Bitcoin and Ethereum have now, you could have found an equally dedicated base of Palm Pilot users. However, innovation continued. Innovation versions 1.0, 2.0, and even 3.0 don’t always survive despite fans and hype. Millions of people learned this lesson the hard way in the dotcom bubble.

This brings us back to gold and silver. They have survived bubbles from tulip bulbs to pets.com. They will always be a stable anchor in any investment portfolio. And for value investors, today gold and silver compare very favorably to a stock market that has risen for eight years, and certainly to cryptocurrencies that haven’t yet found their place in the global monetary system.

Cryptocurrencies are not golden yet. In fact, they would need to become a stable asset for 5000 years before they can claim to be “as good as gold.” Based on where they are today, they have a long way to go.

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