For many Americans, it seems like we’re in the middle of an economic crisis.
And I can’t blame them…
Interest rates are nearing record highs, creating rampant inflation. People are struggling to put food on the table… and fuel in the gas tank.
Meanwhile, many fear the Russian invasion of Ukraine could spark a third World War… Or even worse, a nuclear conflagration.
I know it’s hard not to feel fear and uncertainty in times like these. But my primary message to you is this: Don’t panic. We’ve been through this before.
If you were around in 1990, you remember the first Gulf War.
At the time – in terms of global impact – the economic effects of Iraq’s invasion of Kuwait were more severe than what we’re seeing with Russia and Ukraine.
Oil prices doubled virtually overnight. Interest rates were around 9%. And about a year later the unemployment rate was nearly double what it is today.
We were still feeling the effects of the savings-and-loan crisis that would end up costing taxpayers over $1 trillion.
Just like now, it was painful being an investor in 1990. I know because I was a young executive on Wall Street at the time.
We saw the market crash 20% from its July 1990 high to its October 1990 low. Talk about painful.
I know 1990 seems like a long time ago to many people. But we’ve seen several macro events – like wars, pandemics, and trade embargoes – tank the markets since then.
And I’ve learned that you don’t panic and sell world-class assets during a crisis. Instead, you look for the opportunity.
Right now, I see a lot of opportunity in bitcoin.
Bitcoin Will Be the Next Global Reserve Asset
Since hitting its all-time high in November 2021, bitcoin is down 45%. But when you compare it to tech stocks – which, like bitcoin, are considered risk assets – it’s holding its own relative to its value.
For instance, the Technology Select Sector SPDR Fund (an ETF holding S&P 500 tech stocks) is down 18% in just three months. And major tech companies like Amazon, Apple, and Netflix are down even more than that.
So how does this circle back to bitcoin?
The U.S. and its allies have completely cut off Russia from the global financial system – essentially freezing over $600 billion in its national assets.
Regardless of what you feel about Russia’s invasion of Ukraine, other countries are looking at these sanctions and saying: “Well, holy cow!”
The West can cut off the world’s 11th-biggest economy and nuclear power in a blink of an eye… what does that mean for our country?
So I believe a couple of things will come from this. One is that gold will continue to catch a bid in the short term. It’s up 5% since the beginning of the year.
The world’s central banks will consider increasing their gold reserves and reducing exposure to the euro and U.S. dollar.
But ultimately, I believe bitcoin will be the biggest long-term winner.
While many still consider gold a store of value, it has a lot of limitations.
First, it isn’t easy to move gold. For instance, $1 million in gold bars would weigh approximately 31 pounds. That makes it difficult to transport. Now, imagine trying to transport billions of dollars’ worth of gold… That’s over 15 tons.
Second, gold’s liquidity is all in the paper market… not the actual physical market. By that, I mean much of the world’s gold trading occurs in the futures market, where people buy and sell paper contracts for gold, not physical bars.
Analysts estimate that for every 1 bar of physical gold traded, there are 200 bars of “paper” gold traded. That means if you get frozen out of the financial system, you cannot easily sell your gold.
That’s the opposite of bitcoin. Bitcoin is easy to trade. It’s easy to move – you can store billions of dollars’ worth of bitcoin on a thumb drive. You can’t confiscate it. And it’s not somebody else’s liability.
I believe we’ll see central banks put bitcoin on their balance sheets at some point soon. And it’ll completely change the game.
Just like U.S. treasuries, European bonds, and gold are major reserves today… bitcoin will become a part of a country’s reserves in the future.
I don’t have a crystal ball. I don’t know when it’ll happen. But I am highly confident it will happen.
Time Is on Your Side
I’ve learned not to devote my intellectual capital to predicting the exact date an asset will go higher. Because I can’t do it.
Instead, I’ve found much greater success predicting which assets will see huge upside over a given period.
I’ve taken that approach with crypto again and again.
As many of you know, I project bitcoin will hit $500,000 by 2025. What it does in the meantime, I have no clue. It could drop as low as $20,000 this year… Or rise as high as $100,000. We just don’t know.
But the good news is… you don’t need to know. You just need to get the big call right. If that happens, everything else is just noise.
So, if it makes financial sense to you, I urge you to view this pullback as an opportunity. Don’t confuse what we’re seeing with a permanent erosion of capital.
Enjoy your life, enjoy your children, enjoy your grandchildren.
The assets you own are going to do whatever they want to do on a daily basis. There’s nothing you can do about it. There’s nothing I can do about it.
Sitting in front of the screen and fretting and hoping and praying won’t move the needle forward for you in any way, shape, or form.
So if you have extra capital, think about allocating more to bitcoin.
And as I always say, let time do the heavy lifting.
Let the Game Come to You!
Editor, Palm Beach Daily
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