That Was Boring

by JDH on January 23, 2021

Last week I predicted we were in for a week that would change the world.  Well, not so much.

The Inauguration was a non-event.  The stock market didn’t do much.  Gold is trading about where it started the year, which is strange for the month of January.

Bitcoin, on the other hand, went on something of a wild ride.

After starting the year under $28,000, Bitcoin had a new year’s spike to a new all-time high of $42,000 on January 8, and then promptly dumped to just over $30,000 on January 11, bounced back over $40,000 on January 14, and then dumped again, touching $28,700 on January 21.   As I write this Bitcoin is back over $31,500, but wait 5 minutes and the price will be different.

So is Bitcoin a good store of value if it’s “value” can change by 33% in 3 days?

Is that not the very definition of a bubble?

Or a Ponzi Scheme?

Probably, but does it matter?

Is real estate a bubble?  Of course.  What about stocks?  Yup.

As long as the government prints money, that money will go somewhere, and that somewhere is assets like stocks, and real estate, and crypto.  The party will end when the government stops printing, or when speculators believe that the government will stop printing.  Until then, it’s full steam ahead.

Will Biden stop printing?

(That’s a rhetorical question; you know the answer).

So, as long as the money spigots are open, certain stocks will do well, and Bitcoin will also do well.  It’s just math.

But what about the crash in Bitcoin?  Here’s the truth: As of Saturday morning, January 23, 2021 at 8:00 am Eastern Time Bitcoin is trading at around $31,500, which is exactly where it was on January 2, 2021.  Bitcoin is actually up slightly on the year, and if the “crash” flushed out the week hands, it is likely to go higher over the next few weeks.

Institutional investors are still buying, and I see no reason why the smart money wouldn’t have viewed this correction as a great buying opportunity.

I believe it is also becoming conventional wisdom that you should have between 1% and 5% of your portfolio in Bitcoin, for the possible upside, but also as protection against a stock market crash (which is inevitable at some point).

For Canadian investors, who want to hold crypto in their RRSP or TFSA, QBTC or QETH can be purchased in Canadian or US dollars, and you don’t have the hassle of crypto exchanges and wallets.

Just a thought.

Perhaps next week something will happen in gold and we can discuss that.  More next week.