Why Gold and Bitcoin are Popular (An Overview of Bearer Assets)

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2021-06-14 01:30:06

Investors will debate endlessly regarding whether a stock is overvalued, whether bond yields make sense for the current environment, to what extent oil will be used two decades in the future, and so forth.

But few asset classes are quite as controversial as gold, bitcoin, and other alternative monies. Some people literally put every penny they have into them and trust nothing else, while other people can’t possibly see why they hold any value at all.

Since they are not cashflow-producing businesses or industrial commodities with analyzable supply and demand balances, the bull/bear gap is unusually wide when it comes to valuing things like gold or bitcoin, not just in terms of price but in terms of the very purpose for their existence as investable assets. Some people love them and will happily dollar cost average into 50% price crashes, while others dismiss them as yellow rocks and magical internet money and maintain zero position in the assets under any context.

And yet, it was illegal for Americans to own gold for about 40 years, from the mid-1930s to the mid-1970s. In some places today, it’s illegal to own bitcoin. Governments sometimes find them to be dangerous. How could something so useless, also be so dangerous? Useless things rarely get banned, and instead can be safely ignored as they work their way towards oblivion over time.