The Value of Gold and Bitcoin From a Coffee Lover

It was 7.18 AM, a casual Monday morning to the start of a national holiday in Singapore. I was enjoying my home-made coffee and the tranquility which many of us can never get enough of.

Being human, we have our preferences and how we like our coffee — Some like it bitter, while others don’t. Regardless of personal preferences, there are two important parts to making a cup of coffee; freshly roasted coffee beans, and a good coffee brewer.

I sat at my dining table, slowly sipped my home-brewed morning coffee and reached out to my phone. In a single swift motion, I unlocked my phone and started catching up on my daily news — minutes later, my morning tranquility was gone.

Instinctively I was drawn to the article by this headline — the United States and China. The 2 protagonists from the epicentre of the tariff wars fighting for dominance in currency. This war is about to escalate.

Let’s face it, the economy is on brink of a meltdown due to the coronavirus pandemic and for the Greenback to potentially lose its supremacy at this point is not good news. But then again, as Martin Luther King once suggested — “Every crisis has both its danger and opportunity. Each can spell either salvation or doom”.

Amidst the current volatility in the economy, I have seen renewed interest in gold due to its safe-haven status and Bitcoin as it recently completed another halving. In my mind, 2020 looks like the perfect time to buy gold and bitcoin — Maybe the price of gold will reach $2000 and Bitcoin will find its new support at $20,000. (This is not investment advice)

Now my FOMO kicks in.

Should I buy gold? Will the value of bitcoin surge with halving? Or should I buy both?

Should I buy gold?

I tried to assess the value of gold as how I would assess a cup of coffee. I know gold is a time tested safe-haven because of its innate intrinsic value. It offers a better store of value than fiat currency and governments have been holding gold for 10 consecutive years due to its stable nature.

If gold was coffee, then it is a good coffee bean. How about its “brewing system”? Gold does not offer a good ecosystem. Gold is not portable and divisible in the modern context — simply a white elephant.

That is true until tokenised gold comes along. With the introduction of blockchain technology and implementation of it into the gold industry — blockchain changed the gold ecosystem and introduced the new gold standard.

Tokenised gold allows investors to enjoy the accessibility, transferability, and convenience of digital assets, as well as the stability of the precious metal.

It looks like a pretty good option to me now.

Will the value of bitcoin surge with the recent halving?

I looked at bitcoin from the supply and demand perspective. In the context of bitcoin, there 18.4 million bitcoins in circulation with only 2.6 million remaining out of the 21 million. The demand for cryptocurrency has been growing over the years.

The trend was apparent in the 2012 and 2016 halvings. The price of bitcoin surged within 3 to 6 months as it became more obvious that there will be fewer bitcoins mined. While I know that the volume of bitcoin is limited by a tamper-proof system, I also know that fiat currency is “unlimited” since it can be printed and unprinted.

Governments were flooding the market with fiat currency through quantitative easing before halving took place. This pushed more investors to purchase bitcoin to act as a safe-haven against inflation sparked by massive money-printing from thin air.

It looks like the price of bitcoin will be climbing in the coming months, or will it not? 🤔

While Bitcoin has been referred to as “digital gold” and lauded by many as a way of hedging against downward trending traditional markets, it has experienced its fair share of volatility. From a 10% drop in 2014 as a result of the Heartbleed bug, a 22% price tumble in November 2019 and a recent 55% crash in March 2020.

Looking back, one thing I know for sure, this post bitcoin era in 2020 is different from the past halvings. Never had the economy been in such bad shape when the previous halving took place.

Conclusion

Everyone has different preferences in beverages, hobbies, right down to investing in assets such as gold and bitcoin.

We all have different risk appetites. For me, personally, I am taking a bet on both digital gold and bitcoin. There is no ‘one solution’ for everyone.

My take is to find the asset that suits your portfolio. I would choose the asset like how I choose my coffee. Remember a good cup of coffee depends on the coffee beans and a good brewing system.

Disclaimer: This article is written to express my own opinions. It is not a piece of investment advice from Digix. Digix’s blog may contain statements and projections that are forward-looking in nature, and therefore, inherently subject to risk, uncertainties and assumptions. Do take into consideration your own unique investment situation, objectives, risk tolerance and investment horizon in any investment decision.

About Digix

Digix, incorporated in Singapore in 2014, is the blockchain company behind the world’s first gold-backed digital asset class. Digix uses blockchain to account for the authentication and provenance of 99.99% investment-grade gold bullions. Physical gold bars are registered on the blockchain, and every 1 gram of physical gold registered is pegged to 1 DGX token. The physical gold bars are kept in vaults located in Singapore and Canada.

Digix recently won the 2020 S&P Global Platts: Precious Metals Industry Leadership Award and was a finalist in the 2016 Singapore MAS Fintech Awards.

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