It’s been virtually impossible to avoid discussions about Bitcoin in recent days as the electronic currency soars from $150 to over $900 in recent weeks. The parabolic surge is breathtaking to say the least:
But what I find more interesting about Bitcoin is that its huge rise is occurring at the same time that gold continues to move lower. Gold is now down 23%+ this year as Bitcoin has jumped from $14 to $900 (you do the math on that!).
Of course, Bitcoin and gold are both considered alternative forms of money to fiat money. But there’s a big difference between gold and Bitcoins, in my opinion. Gold is a very poor medium of exchange because of its physical properties. This makes it a rather poor form of money, especially in a fast paced electronic economic system. But Bitcoin is different. Bitcoin has the potential to be every bit as good a medium of exchange as any other electronic form of money. It just needs to start getting accepted as a form of final payment by more and more merchants.
So the interesting thing about this rally in Bitcoin is not that Bitcoin is rallying, but that it’s occurring at a time when gold is collapsing. I can’t help but wonder if this is a sign of the anti-fiat money crowd voting with their wallets on the potential that gold really isn’t a viable form of future money while something like Bitcoin might just be….
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.