Bitcoin, “the new gold,” has been beating conventional gold by a big margin YTD. The Bitcoin Investment Trust has gained a whopping 1407.42%, while SPDR Gold Shares have gained 11.93%. Both assets outperformed the S&P 500 and the twenty-year US Treasury bonds.
| Fund | YTD Performance |
| SPDR Gold Shares | 11.93% |
| Bitcoin Investment Trust Shares | +1407.42 |
| SPDR S&P500 | +18.79 |
| iShares 20+ Year Treasury Bond | 6.11 |
Source: Finance.yahoo.com 12/29/2017
This the second year in a row Bitcoin has beaten gold and Wall Street.
Last year, the Bitcoin Investment Trust more than doubled in value, while the yellow metal gained 8.73 percent; and both assets outperformed the S&P 500 and the twenty-year US Treasury bonds.
| Fund | YTD Performance |
| SPDR Gold Shares | 8.73% |
| Bitcoin Investment Trust Shares | +107.42 |
| SPDR S&P500 | +8.27 |
| iShares 20+ Year Treasury Bond | -0.59 |
Source: Finance.yahoo.com 12/5/2016
Does this make Bitcoin a better investment than gold in 2018? It’s hard to say, as past performance isn’t a guarantee for future performance, as the old adage goes in Wall Street. Besides, Bitcoin has been around for a short period of time.
Still Bitcoin has many advantages over traditional currencies that may accelerate its use in the future.
“Bitcoin has many advantages over government currencies, not the least of which is that its supply is fixed,” says Finance Professor Geoffrey Smith, W. P. Carey School of Business at Arizona State University. “Thus, its purchasing power cannot be diminished by ‘currency printing’ by governments. See Venezuela and their inflation, for example. Anonymity is also an advantage. The blockchain technology also provides perfect record keeping, which eliminates mistakes and the opportunity for fraud and theft”
“ Bitcoin is also an international currency, which can be used to facilitate international trade. It may also be very useful in low-trust countries with high levels of corruption where the banking system and legal system protections are not very strong. It remains to be seen, however, if it is useful as a currency due to the high volatility. Yet the number of Bitcoin transactions seems to be increasing every day.”
Of course gold has its own advantages, too. It can be used to make jewelry, and in manufacturing of certain products.
Meanwhile, Bitcoin has disadvantages. Blockchain, the technology that created Bitcoin, can be used to create other cryptocurrencies that might compete against Bitcoin. In fact, it has already done so, creating Etherium, Litecoin, and Ripple, to mention but a few.
That’s why investors shouldn’t rush to substitute the yellow metal for the digital currency in their portfolio. Especially if they don’t quite understand the nature of the digital currency.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
