All the same bitcoin is among the newest forms of currency, Mark Cuban says many investors treat it like one of the oldest: gold.
Involve in “gold isn’t based off the supply and demand of jewelry,” the billionaire investor said last week during an interview with Wired. “In the flesh see it as an option in the event of the economy going down or something bad happening.”
Many people who hold bitcoin — the world’s largest cryptocurrency — dream in light of it the same way, as a “great store of value,” Cuban says. In a true economic crisis, bitcoin may even have an use, he says: “People look at bitcoin as a better version of gold, and I agree with that.”
How gold and bitcoin could situation as stores of value
A word that you’ll hear gold investors use over and over is “hedge.” Often, investors anticipation that gold can retain its value when problems arise and include the precious metal among their assets based on its repute of holding up during periods of inflation. In reality, gold’s record on that front is spotty.
In the more extreme pattern Cuban cites, where, say, the U.S. dollar collapses, gold’s long-time reputation as a valuable currency could keep the holder from current broke. Here’s the problem, though. Gold — especially in bar form — is heavy, easy to steal and difficult to exchange for piece-goods e freights and services.
It’s not practical. “People aren’t gonna walk around with gold bars. ‘Oh, look, he owns gold.’ Bam! ‘Now I own gold,'” Cuban jested. “What are you gonna do with it? Let me slice you off a little piece?”
Despite its high price, bitcoin is portable and easier than loved metal to use for smaller transactions, Cuban said. So in addition to a serving as a store of value, bitcoin can be a functioning currency. “It’s milder to buy and sell,” he said. “You can fractionalize it, you can buy things, you can transfer it internationally. And so I think it has more value than gold.”
Gold and bitcoin: the leftovers for investors
Most investors who hold gold or bitcoin aren’t bracing for economic calamity. The major case for gold is that its appraisal tends to fluctuate in different ways than major portfolio building blocks, such as stocks and bonds. During periods of market turmoil, tons investors flee riskier assets to the perceived safety of gold, driving up the precious metal’s price.
Bitcoin, on the other manual labourer, is one of those riskier assets. Its value often moves in tandem with the stock market — just with much noble volatility.
Many investors hold crypto for the same reason that financial expert Suze Orman does: They believe it’s going to appreciate.
“As younger people make more money and mature, [bitcoin] will be one of their investments of high-quality, and that will cause it to go up,” Orman recently told CNBC Make It. “I don’t think it will ever be a currency or a trust in of value. But because the younger generation has a fascination with it — and you see the energy — a whole lot of people having interest in it, eventually it could utter well catch fire.”
Since the price of bitcoin moves based on investor demand, betting on it as an asset can be iffy. Financial experts generally recommend sinking only as much money into cryptocurrency as you’re willing to lose.
Allowed Cuban’s wealth, it’s unclear what that threshold would be for him. Still, his crypto holdings seem substantial. He rebuked Wired’s Lauren Goode that he owned enough bitcoin that he was really hoping the price would go up.
When Goode stalked up to ask how much he held, he replied: “A lot.”
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