Bitcoin and other cryptocurrencies aren’t very good at being currencies.
They’re ridiculously volatile, and many merchants you’ll encounter will remain reluctant to accept them. This may change in time, however, but over the medium term, I think it’s safe to say that your local grocery store won’t be accepting Dogecoin (or the broader basket of cryptocurrencies) as payment any time soon.
Starbucks announced its acceptance of Bitcoin recently, and as time progresses, it’s not too far-fetched to think other well-known retailers will accept the most popular cryptocurrency in order receive a temporary jolt to sales due to the novelty. For the most part, most “investors” will treat Bitcoin as a speculative asset that may be an effective means to reduce market exposure.
The problem with Bitcoin (and other cryptocurrencies), though, is that they’re pretty prone to price manipulation by a corrupt few individuals. That means your Bitcoin today (which can purchase +1,000 coffees) may not be able to purchase a single latté a year from now if the asset were to collapse in price unexpectedly.
But for the most part, cryptocurrencies themselves will remain as a non-productive asset that is not tied to the broader stock market, and that makes it a pretty attractive place to mitigate the risks that come with stocks.
While you may be enticed by Bitcoin (and the extreme risks), there is a better asset out there that I believe is a superior “hiding place” for those looking to reduce their exposure to stocks. And that asset is gold — gold coins, bullion, or, if you can afford it, bricks. But if you’re not willing to pay rent on a safety deposit box to store your shiny metals in, your better bet would be to go with a gold miner like Barrick Gold Corp. (TSX: ABX)(NYSE: ABX), whose price will move in conjunction with gold prices.
Gold has taken a hit on the chin lately thanks in part to an overall bullish tone on stocks and probably the existence of Bitcoin (and the like), which Charlie Munger once referred to as “worthless artificial gold.”
While Munger’s words for the asset are indeed harsh, I think he’s right on the money. Why risk your shirt when you could mitigate stock risk with good, old-fashioned gold?
As the yield curve inverts, the stage will be set for a recession and a bear market at some point in the future. If that alarms you, I’d buy Barrick, which will be a great hideout and will provide you with a hedge against inflation.
Barrick expects production to increase in the latter half of the year, as it looks to fulfill its original full-year guidance of 4.5-5 million ounces at sustaining costs between $765 and $815/ounce. The company also possesses sustaining costs that are well below your average gold miner.
Stay hungry. Stay Foolish.
