We have a ‘Comeback of the year 2020’ nominee finally! #Bitcoin is back from the dredges after the bubble popped in 2018. And it has caught our attention one more time. If something is up more than 300% in a year it deserves a closer look, right?
If you look at the google trends results closely, the chart looks quite similar to the $BTC price, especially in the 2017-18 (when it came crashing down) but not quite this time around.
I got swept away by this ‘Crypto-mania’ back in 2017 too. While I was fortunate enough to come out of it unscathed (well, almost), I decided to sit on the sidelines this time around to let this play out.
The value of any asset depends on the eyes of the beholder, as they say. The narrative gives you a lens to look for your signal amongst the noise. In the case for bitcoin (or any other crypto-currencies), what is the narrative that is guiding your value?
Do you think it replaces the fiat currencies issued by global central banks? Would you consider something as a store hold of your wealth that corrected -84% in 2018? The sheer pain of watching your net worth drop down by some 43% (a random percentage) in a week, ouch. Here’s some interesting data from Charlie Bilello on Twitter last week.
I believe digital currencies will have their place, but not as USD or EUR replacements, but as complements, simplifying digital payments and transfers for the under/un-banked of the world.
The popular narrative floating around this time is ‘Digital gold’. #DropGold was in the top trends on twitter for a while too. Gold as an asset class goes back to centuries ago. Again, even though its just a shiny metal, it is ‘accepted’ as a store hold of wealth. And it has SURVIVED! Gold has a brilliant track record of making it through the bleakest of times, and investors and speculators have often rushed to buy gold when times are uncertain. Found a really interesting take on gold for those who want to delve deeper into the topic.
Comparing bitcoin to gold is just preposterous in my opinion, something that has a 5 century track record to a piece of that was programmed 10 years ago! Speculators on this side of the isle maybe see some similarities of bitcoin outperforming other asset classes, or maybe they’re just clutching at straws here.
I believe the underlying technology has potential and it is highly likely we see some of its use cases being put to real use in the time to come. Before you press the buy button on this one, take a moment and get your head around what this piece of software can do for the world. Then choose your narrative.
Until next time,
The Atomic Investor