Bitcoin is becoming a “chaos hedge” of choice…
That was colleague Teeka Tiwari speaking seven years ago on why he was bullish on bitcoin.
I remember it well… In July 2016, I talked to him at our Legacy Inner Circle advisory about why he’d recommended bitcoin to his subscribers three months earlier.
Bitcoin had soared from $13 to more than $1,000 the wake of the banking crisis that engulfed Cyprus in 2013. And I wanted to know if it would soar again if we got another banking crisis.
Here’s what he told me…
Without question… Bitcoin is becoming a “chaos hedge” of choice among investors, traders, and hedge fund managers. It’s almost become the new gold.
That prediction proved spot-on.
The banking crisis that erupted earlier this month has caused chaos. And investors have rushed into gold and bitcoin to sidestep the potential damage.
So, today, let’s look at why it makes sense for bitcoin and gold to trade similarly given what’s going on with the banks. And I’ll show you why bitcoin has more upside… even at today’s prices.
First, a warm welcome to new readers…
The Daily Cut is the big-ideas e-letter we created for all Legacy Research subscribers.
It’s the publisher behind Teeka, Jeff Brown, and Nomi Prins.
If you’ve found us in your inbox for the first time, it means you recently subscribed to one of their advisories.
My mission as editor is to bring you their most profitable ideas about how to move the needle on your wealth. I’m also here to help you navigate the many crises the market throws at us along the way.
That’s why I’ve spilled so much ink on bitcoin… And why I hope you’ve been paying attention.
Since I first spotlighted Teeka’s bullish call on bitcoin [Inner Circle members can read that right here], it’s up 4,270%. That’s enough to turn $1,000 into $43,700.
So why did Teeka call bitcoin the new gold?
Pull out $20 from your wallet…
The note you have hand is what’s known as a bearer instrument.
You don’t have to register to own it. There’s no account associated with it. If you have it in your possession – if you’re the bearer – it’s legally yours.
So, bearer instruments allow direct transactions between two willing parties without the need for a bank or middleman.
If you’ve seen the 1988 movie Die Hard, you’ll have heard of bearer bonds. These are what the movie’s villain, Hans Gruber, steals from the U.S. government from a vault in an office building he’s hijacked.
But that’s actually a plot hole. Bearer bonds became obsolete in 1982. By the time Die Hard hit the big screen, U.S. dollar bills were the only bearer instruments Uncle Sam still printed up.
But gold and bitcoin also fit the bill…
On the surface, gold and bitcoin seem very different…
Gold is physical. Bitcoin is digital. Gold has been used as money for nearly 4,000 years. Bitcoin is only 14 years old.
But they’re both bearer instruments.
You can self-custody your bitcoin in a digital wallet app. And nobody can access your funds without your cryptographic key.
And you can send and receive bitcoin to and from anywhere in the world 24/7, 365 days a year. Banks don’t factor into it.
You can keep gold somewhere safe at home. You don’t need a third party to access it.
With gold bars, you’d have to lug them somewhere to transact with someone in person. But if you own gold coins, that’s relatively easy.
That’s completely different from “money in the bank”…
I’ve been writing about this a lot lately. But it’s vital you see the difference. Otherwise, you won’t see why bitcoin and gold are so important.
Your deposits are a liability of your bank. They’re IOUs. The bank promises to pay your money when you go to withdraw it.
So, if your bank goes bust, good luck getting it. You’ll have hope the government comes to the rescue… and stand in line to get your savings back.
That’s why I’ve never understood the bad feelings some gold folks have about bitcoin and some bitcoin folks have about gold.
Both are great ways to store your wealth outside of the banking system.
There are several options for buying gold…
The most “off-grid” you can get is to own physical gold – either bars or coins – in a secure location on your property.
You also can buy physical gold through the Sprott Physical Gold Trust (PHYS).
It’s the next best thing to holding actual gold. PHYS shares are fully backed by physical gold and can be redeemed for the metal.
Sprott stores its gold in a fully allocated account at the Royal Canadian Mint. That means it holds titles to specific serialized gold bars. So even if the fund goes out business your gold is in your name.
This contrasts with other gold exchange-traded funds (“ETFs”), such as the SPDR Gold Shares ETF (GLD), which holds its metal in unallocated accounts.
GLD doesn’t have titles to any specific bars. This creates a counterparty risk. Your gold is vulnerable should the custodian go under.
But if Teeka is right, bitcoin has way more upside than gold…
The market value of all mined bitcoin is about $598 billion.
That may sound like a lot. But it’s still about 20 times less than the $12.9 trillion value of all the world’s mined gold.
So, if bitcoin’s market cap rises just to the same level as gold’s market cap… it would mean a bitcoin price of $612,000.
That’s a 2,047% gain from the bitcoin price of $28,458, at writing.
And that’s just if bitcoin hits the same market cap as gold.
Given that the world is becoming increasingly digital… and that millennials and Gen Z investors are likely to prefer a digital coin over a physical one… it’s reasonable to expect that will be a floor, not a ceiling, for the bitcoin price.
Just remember to store your bitcoins in a secure digital wallet.
Coins you leave with a cryptocurrency exchange have the same problem bank accounts do. They amount to nothing more than promises to hand over those coins if you come looking for them.
And bitcoin isn’t Teeka’s top crypto recommendation right now…
Last week, he shared details about a tiny subsector of the crypto market that will benefit from the coming “buying panic.”
Unlike most cryptocurrencies, these coins are programmed to pay you monthly income on top of capital gains.
And they’re set to benefit from a surge of activity coming to one of crypto’s largest networks as early as next month.
During his event, he explained what this catalyst is and what types of tokens will benefit from it. For a limited time, you can stream it right here.
Regards,
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Chris Lowe
Editor, The Daily Cut