Sep
A Bitcoin & Gold Update
Volunteer Latin America was the only volunteering platform to give its users a "heads-up" about acquiring Bitcoin and physical gold in advance of a significant upward movement in prices. In our article from September 2019 entitled Cryptocurrency to Facilitate Travel and Volunteering Overseas we advised readers to invest in Bitcoin when the price was around €9,100 per coin. In our article Preparing Financially For Travel & Turbulent Economic Times from May 2023 we recommended readers turned some of their cash into physical gold when the price was around US$1900 per ounce. Bitcoin is currently valued at €52,958 Euros per coin and the spot price for one once of gold is currently US$2500. I think you will agree that both assets were outstanding investment opportunities. The smart way to raise money for volunteering abroad or a travel adventure amid soaring inflation and low savings account interest rates. The all-time high price of one Bitcoin is €67,405, recorded in March 2024. If you sold at the top from our suggested entry point you would have made an extremely healthy profit (approx. +740%). Gold reached an all time high of US$2531 in August of 2024. Another healthy gain from our suggested entry price (approx. +32.5%).
Moving forward both assets are worth holding as an investment and a safety hedge. However, that does not mean Bitcoin is a safety hedge with no risk. Bitcoin is still an immature asset, only 15 years old versus gold that is thousands of years old (in terms of its acceptance as a store of value). Gold is the old trusty play when the government runs up massive debt, fear creeps in and inflation soars. While boring, it keeps investors hedged much better than Bitcoin in the near term. Sure, it does not have the upside that Bitcoin can have, but it certainly does not have the drawdowns either. Bitcoin can move wildly. Despite the volatility in the cryptocurrency space a combination of the two (Bitcoin and gold) likely make up the best allocation for investors. Both long-term likely protect against massive money printing. A diversified portfolio is not just wise; it is essential for financial well-being in a volatile market.
I believe the mid to long term trajectory of gold is higher as investors will likely continue to clamour for physical gold and hoard it indefinitely. Central banks and investors know the long-term outcome of fiat currency. This is partly why they have been scooping up as much physical gold as they can get their hands on. The next near-term target based on technical analysis is US$2,660 per ounce, which should be achieved by the end of 2024 or early 2025. Once there, investors should expect a longer and deeper pullback before the next bull run. A confluence of factors (e.g. the geopolitical climate, negative divergences on RSI, etc) could put downward pressure on gold sooner but we will likely see continued upside. The next major pullback is the time to acquire some physical gold.
Virtually everyone in the cryptocurrency space will say you should think of Bitcoin as digital gold, and the price is going to US$100,000 per coin and beyond. Bitcoin could reach the elusive US$100,000 mark, but it is not guaranteed. Optimism about Bitcoin’s future remains high, but seasoned investors recognize that market developments do not always align with expectations. Is Bitcoin on the road to six figures or will it crater and break back much lower in the coming months? Bitcoin is still a risk asset and will follow the financial markets until there is a significant divergence. Should there be a huge stock market crash, Bitcoin too plunges and altcoins get hammered. You can make astronomical gains on altcoins but can suffer more significant losses than the top digital currency when the crypto market declines. I think the days when the altcoin Polygon (MATIC) gained 17,000% during the crypto boom of 2021 are unlikely to repeat. What we witnessed in 2021 was possibly a once in decade, maybe once in a lifetime opportunity. I doubt very much MATIC will ever reach US$2.90 again, but we shall see. Just about all the major altcoins have not regained their previous all-time highs.
Is Bitcoin headed for all time highs post-halving or will it be a damp squib? Following the first halving in November 2012, Bitcoin’s price jumped around 9,500% to a peak of US$1,160 in one year, while after the 2016 halving the price rose by 3,040% to $19,660 around 18 months later. After the halving in 2020 the price took time to rise but ended up 802% higher to a top of $73,800 almost four years later. The stock-to-flow analyst Plan B remains steadfast, confidently asserting that Bitcoin will hit US$100,000 before the year ends, and the price will surpass US$500,000 in 2025. Plan B's unwavering confidence in the stock-to-flow model is about to be put to the test. It is difficult to say exactly what will happen to the cryptocurrency market in the remainder of 2024 and beyond. Will we see an explosive move in Bitcoin to $100,000+ as predicted by Plan B, previous halving events, and the very bullish pattern on the weekly chart (enormous cup and handle pattern), or will we witness a pullback to US$44,000 or even the major technical level at US$30,000? Many Bitcoiners would scoff at such a proposition but a very bearish S&P500 because of the US going into recession will trigger a downward spiral. The S&P500 could drag Bitcoin down with it if there is a large market correction. Keep a close eye on the S&P500.
The big question for first-time buyers is 'should I buy now or wait for a crash'? I have my own thoughts on where the price is headed in the coming months and have a different view to Plan B, but this should not be considered as financial advice. Whether you invest in Bitcoin now or wait is a personal decision. All I will say is if you are newcomer to the cryptocurrency space, a prudent strategy is to invest only what one can afford to lose. Personally speaking, I would stick to an established crypto asset like Bitcoin with a large market capitalization. Bitcoin is in a league of its own. Another prudent strategy is the time-honoured investment strategy called dollar-cost averaging (DCA). This involves purchasing set amounts of Bitcoin at regular intervals (weekly or monthly), whether the price is high or low. This strategy allows you to reduce your average purchase price. It is also an effective way to take some of the emotion out of investment decisions and provides opportunities for greater returns over time. It is difficult to perfectly time market tops and bottoms, and DCA allows you to methodically build a position. You can also consider occasionally making opportunistic extra purchases when the market drops significantly.
Published in September 2024.
