There are two assets that act as a hedge against a potential failure of the fiat currency system: Gold and Bitcoin. Although they are similar in certain ways (limited supply, no cash flow), they are very different in others: Bitcoin is decentralized, electronic, and anonymous. Gold is physical, and therefore has to be custodied and guarded. In the chart below, you can see the correlation between both has been mostly positive over the last 8 years, but since the election, both assets have diverged in behavior. While bitcoin has skyrocketed aggressively, gold has taken a pause. The new administration is perceived as pro crypto, and has even suggested the Fed should hold crypto in its balance sheet, and is pro deregulation, which can lift Bitcoin ownership in the US. But the important part is that betting on Bitcoin is betting against the current system, where the U.S. dollar has the advantage of being the global reserve currency. In a way, it’s like a king that wants to lose its privileges to become a peasant. Gold, however, can coexist with the current system, it’s the foundation of the fiat system. Should the US bet against its privilege?
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