Tired Bitcoin investors chase shiny new object—gold
For three years, Mitch Day rode bitcoin’s wild swings, through the record highs of 2021 to the cold water dive of 2022.
For three years, Mitch Day rode bitcoin’s wild swings, through the record highs of 2021 to the cold water dive of 2022.
Mr Day and a number of his cryptocurrency compatriots have since turned to the asset favored by pharaohs, pirates and Scrooge McDuck, helping to fuel an outbreak of gold fever.
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Mr Day and a number of his cryptocurrency compatriots have since turned to the asset favored by pharaohs, pirates and Scrooge McDuck, helping to fuel an outbreak of gold fever.
“For a long time I kind of thought, ‘Oh gold and silver?’ It’s a bit of the old stuff,” said Mr. Day, a 27-year-old college student in Kelowna, British Columbia. “Sure, I’m not necessarily going to get rich buying gold, but it will hold that money in uncertain times better than many other things.”
Bruised by steep declines in a number of cryptocurrencies, some investors who preached crypto’s independence from banks and national currencies have diversified into gold.
Online searches for “crypto” and “gold” in the same search last year reached their highest levels since 2018, according to an analysis by Nick Martin of Vancouver-based social media marketing platform Hootsuite. Google searches for the phrase “how to buy gold” have reached their highest level on record so far this month, according to Google Trends data going back about two decades.
The SPDR Gold Shares exchange-traded fund, the largest ETF backed by physical gold, has risen about 20% in the past six months. Sales of American Eagle gold coins in January hit the highest monthly number in more than a year, running close to last year’s pace through the first quarter, according to the US Mint.
Bitcoin has lost roughly half of its value since the end of 2021, as well as much of its mystique. The collapse of cryptocurrency exchange FTX further crushed enthusiasm, along with the paychecks of such major promoters as Tom Brady, Kim Kardashian and Shaquille O’Neal. Crypto firms spent more than $70 million last year to air Super Bowl ads. This year not a single one played.
Gold prices, on the other hand, remained almost flat last year, while shares and bonds had double-digit losses. In recent weeks, fears of turmoil in the banking sector have driven gold futures prices above $2,000 per troy ounce for the first time in a year, near record highs.
Touted by fans as the future of investment, Crypto has a lot to cover. The current market cap of all cryptocurrencies is around $1.2 trillion, according to CoinMarketCap. As one of the world’s oldest assets, gold has a total estimated value of $14.5 trillion, according to data from industry group the World Gold Council, which estimates the amount of gold mined worldwide.
Gold was valued by the ancient Egyptians and Incans. It lured European explorers to the New World and the original 49ers to California. The precious metal remains a staple in investors’ portfolios, valued for its stability and as a hedge against inflation. It can also be easily melted down into bars or coins, a valuable advantage for criminals now that the authorities have broken the anonymity of digital wallets.
Rob Saudelli, of Chilliwack, British Columbia, is among those diversifying away from digital holdings. His investments in a crypto mining company increased 10 times from late 2020 to early 2021. Since then, he has become disillusioned with cryptocurrencies, tweeting that they will save the world and bring peace.
“I hope it comes true, but none of this will help my retirement account increase in value, as a lot of people found out the hard way, including myself,” Saudelli, 56, said.
At the beginning of 2022, Mr. Saudelli’s portfolio contained approximately 10% bitcoin and Ethereum. These holdings have since fallen to 5%. “People had a party and now they’re leaving,” he said of the crypto boom.
Mr. Saudelli, like some in the cyber crowd, says they are willing to trade the meteoric gains — and gut-wrenching plunges — of cryptocurrencies for the relative stability of gold prices. His portfolio includes about 10% in gold and 14% in silver, he said.
Daniel Fisher, CEO of Physical Gold Ltd., a precious metals dealer in London, said crypto’s decline and stock market turbulence have kept him busy selling gold and silver coins in recent months. A lot of people think, ‘I can keep this going and lose everything,’ he said, ‘or I can start taking chips off the table.’
Luis Sousa began limiting his cryptocurrency holdings to bitcoin in late 2021, he said, and began adding gold Britannia coins in early 2022. “Even at the worst possible time in the market, gold’s worst will be better than bitcoin’s worst ,” said the 29-year-old vet from Cardiff, Wales.
Knowing that gold isn’t going to take him to the moon, Mr. Day echoes the language of traders who believe a particular cryptocurrency will skyrocket in value. He buys gold coins to preserve his wealth.
Bitcoin shares common qualities with gold: Both are mined. It’s also not wallet-friendly. And they are practically useless for buying gas, groceries or a movie ticket.
But gold has a clear advantage compared to digital currencies. “It looks beautiful in itself,” said Mr. Day, “and you can hold the wealth close in your hands.”
