Forget Bitcoin! Gold Could Be Ready to Shine!

HIVE Blockchain (TSXV:HIVE), Bitcoin, and other cryptocurrency miners may be trading like gold, but don’t count the shiny yellow metal out yet.

Gold king in chess game face with the another silver team on black background (Concept for company strategy, business victory or decision)

Image source: Getty Images

Bitcoin and cryptocurrencies have been heating up again. Like back in 2017 and 2018, I don’t think it will end well. Although I think Bitcoin and its miners, like HIVE Blockchain, are great instruments to trade, I still question cryptocurrencies as long-term investments. They have a limited track record, and I can’t say I’m encouraged by their positive correlation to the stock market during times of crisis. During the 2020 stock market crash, Bitcoin crumbled hand in hand with your average stock. As a speculative asset, it plunged more violently than most other steady plays on the TSX Index.

Bitcoin blasts off

While Elon Musk and Jack Dorsey are now aboard the Bitcoin bandwagon, I’m not yet ready to make the dive. And, apparently, neither are Warren Buffett or Charlie Munger. Both men don’t seem to be ready to give their blessing to get into cryptocurrencies or Bitcoin. Given Munger’s prior comments on the cryptocurrency, I think the man is not tempted in the slightest. Heck, the more the asset soars in the price, the more he’ll probably hate it!

There are some pretty good arguments out there for why Bitcoin and crypto are deserving of a (small) spot in one’s portfolio as a diversifier. While they could be true, I can’t say that I’d be willing to recommend holding something that’s capable of shedding more than half of its value overnight. Bitcoin is the asset that never sleeps. It could even plunge during the weekend or during your spring and summer vacation!

Is Bitcoin the new gold? Are things really different this time around?

In any case, I’m not yet buying that Bitcoin is the new gold, even though many may tout it as “millennial gold” or some form of modern digital gold. Charlie Munger seems to think that Bitcoin is “worthless artificial gold.” And I don’t think he’s wrong, even though its performance through 2020 suggests that he is.

Gold has been around for millennia. It has a track record, and I believe that far too many investors are discounting the precious metal’s use as a portfolio diversifier in the era of Bitcoin. Gold has been under considerable pressure in recent months, as cryptocurrencies continued to spread their wings. While neither Warren Buffett nor Charlie Munger are gold bugs, as it’s also an unproductive asset like Bitcoin, I think investors should have some precious metals exposure in this kind of environment, where inflation could grow to problematic levels.

If it acts like gold, shines like gold, then it must be gold … right?

For now, Bitcoin will act and smell like a superior version of gold to most people. Those who dump their Barrick Gold for HIVE Blockchain stock, I believe, will be left in tears once the next cryptocurrency crash hits. I suspect cryptocurrencies will act like gold until the next panic. All bets will be off the table when that happens, and gold could be in a spot to shine.

Now, I’m certainly not against trading Bitcoin. It just makes me a bit worried when investors start treating the asset as a replacement for gold. I suspect more young investors will follow in the footsteps of ARK Invest’s Cathie Wood. She’s a Bitcoin bull who thinks the asset is becoming a portfolio mainstay. I have my doubts.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned.

More on Metals and Mining Stocks

Gold bars
Metals and Mining Stocks

Why Alamos Gold Jumped 7% on Wednesday

Alamos (TSX:AGI) stock and Argonaut Gold (TSX:AR) surged after the companies announced a friendly acquisition for $325 million.

Read more »

Nuclear power station cooling tower
Metals and Mining Stocks

If You’d Invested $1,000 in Cameco Stock 5 Years Ago, This Is How Much You’d Have Now

Cameco (TSX:CCO) stock still looks undervalued, despite a 258% rally. Can the uranium miner deliver more capital gains to shareholders?

Read more »

Super sized rock trucks take a load of platinum rich rock into the crusher.
Stocks for Beginners

Cameco Stock and More: 3 TSX Commodity Titans to Watch in 2024

Cameco stock and these others will provide you with growth that goes beyond just a year or two, with all…

Read more »

Handwriting text writing Are You Ready For Tomorrow question. Concept meaning Preparation to the future Motivation Stand blackboard with white words behind blurry blue paper lobs woody floor.
Stocks for Beginners

3 Reasons to Buy Lundin Stock Like There’s No Tomorrow

Lundin stock (TSX:LUN) has been killing its production of copper and plans on blowing its records out of the water…

Read more »

Gold bars
Stocks for Beginners

TSX Materials in March 2024: The Best Stock to Buy Right Now

Materials have been quite volatile, though the price of gold has surged to all-time highs. That makes this stock a…

Read more »

Gold bars
Metals and Mining Stocks

Will Gold Stocks Rally in 2024?

Down almost 30% from all-time highs, Franco-Nevada is a gold mining stock trading at a discount to consensus price target…

Read more »

A miner down a mine shaft
Stocks for Beginners

Canadian Mining Stocks: Buy, Sell or Hold?

Canadian mining stocks have seemed like such a strong investment, but with shares down significantly this year, what should we…

Read more »

Gold king in chess game face with the another silver team on black background (Concept for company strategy, business victory or decision)
Stocks for Beginners

Great News for Gold Stock Investors!

Gold has hit an all-time high! Which is good news for some gold stocks, and really good news for others.

Read more »