Crypto or Precious Metals?

The title is misleading. There are more things to invest in than those two asset classes. In times of turmoil though, they both claim to be a safe haven.

For the safe haven folks, which should you choose?

The Lindy Effect.

Precious metals, particularly gold have been a crowd favourite for about 5,000 years.

You may have heard of the Lindy Effect. It claims that a non-perishable thing like gold or silver, has a future life proportional to its time of use to date. It’s possible that precious metals will always be around in the role of defense against monetary chaos. The Lindy effect does not however, require that a survivor be the only thing of its kind, nor that it even be dominant.

The usurpers

Blockchain based currencies’ are the new kid on the block. BitCoin and Ethereum are the biggest by market capitalization at $1.17 Trillion US$ and $540 Billion respectively. Only Binance coin also exceeds $100 billion. However there are 98 more that have a market capitalization over $1 billion. There are another 92 over $300 million. The entire market is in the range of $2.5 trillion.

For perspective that’s about 5% as much as the value of all US stocks. Significant value..

What do you need to know to be an investor

Some coins have a limited supply while others do not. The ones with a limited supply, like BitCoin may have some characteristics like gold.

There are about 6,000 different coins to choose from. There are 3,800 registered American stocks. It will be difficult to pick the right crypto coins , or even a basket of good ones. Today there are fewer than half as many stocks as there were in the late 90s tech boom. Twenty five years from now, how many coins will still survive? I doubt so many as half. More likely not twenty.

What are the conditions where gold or crypto will provide value to investors? If you cannot answer that, you may want to stop and think about it. Is the crypto market a giant bubble or an opportunity? How are they promoted? By their intrinsic value or as hype? Why would someone in the future buy crypto?

What conditions must exist for them to be around at all. Clearly governments must be prepared to at least tolerate them. In the short run I expect governments to create their own.

Intrinsic value relies on what something will earn or do. To estimate the future value of crypto, you have to believe they have a use. Like gold, not so much silver, the price depends on what people will pay and not for its usefulness in any other situation. You could argue they will support an underground economy and I suppose that is not crazy, but gold has been doing that too, and for longer.

Governments will act in their own interests eventually — just as the American government did when they outlawed private gold holdings in 1933. I don’t know if crypto would be harder to outlaw, but probably. If all the leading economies did it together, it would revert to financing drug deals and online-organized contract killings.

The Takeaway

Crypto is a perfect example of a thing that is worth what it will fetch.  Most investments are based on worth being connected to what they will earn.

What it will fetch in the future will depend on conditions then and no one knows what those will be.

Fetching anything will depend on it being tolerated by large governments.

Reviewing history gives few clues to what factors you can attach to in order to predict value.

Be very careful. It is reasonable to have some in your portfolio, but not a huge amount. Picking which ones will be challenging.

I help people have more retirement income and larger, more liquid estates.

Call in Canada 705-927-4770, or email

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