If Bitcoin is the New Gold, Is That a Good Thing?
Bitcoin is supposedly “digital” gold. Let’s say I concede this is true…. is that a good thing? In 1971, the US went off the gold standard and by 1980 gold went from $35* to $600+. Let’s see how that compares to Bitcoin.
The rally in bitcoin has been far, far higher in terms of percent but the overall look is pretty similar if we line up today with 1980.
The problem? After 1980, it took 26 years – 26 (!) years – to get back to $600 an ounce. In fact, since 1980, the total returns for gold, T-bonds, Corporate bonds, and Stocks has been:
- Inflation: 215%
- Gold: 177%
- T-Bonds: 1831%
- Corporates: 4406%
- Stocks: 9744%
See the problem with Gold (and Bitcoin) is that there is no REAL return. If you buy an ounce of gold or a bitcoin today, in 100 years… you have an ounce of gold and a bitcoin. Yes, they can potentially protect you from inflation… but that’s it.
I’m not sure if this is 1980 for Bitcoin. Things can get more crazy than you think. And Financial assets have enjoyed lower rates over this time period. But it still doesn’t change the fact that Gold (and Bitcoin) in the long-term guarantee you no real rate of return.