By Jeff Clark,
Senior Precious Metals Analyst, GoldSilver.com
If you’ve made a profit from bitcoin and other cryptos, congratulations! You’re obviously a smart investor who spotted a trend early on and was able to profit. Hats off to you.
But now it’s time to take some profits… right? If you were smart enough to buy in early, you’re smart enough to know that it’s not a profit until you take it. And that asset prices don’t rise forever, no matter how revolutionary the technology.
An article by Jeff Clark.
Yes, some cryptos will gain widespread acceptance and use, but most won’t. Yes, the technology is here to stay, but that doesn’t mean prices will rise indefinitely. Yes, it’s a whole new industry that will continue to grow and evolve, but that doesn’t mean you’ll make a killing forever.
Until you book a profit, it’s only a gain on paper (or digitally). It’s important to sell some of your position to lock in a gain. Here’s why…
The Key to “Mining” Your Profits
Remember that famous line from the movie The Graduate? “One word: plastics”. Getting into that industry early made many people wealthy.
And the story of Jed Clampett discovering black gold on his property when the oil boom was heating up? The account may be fictional, but plenty of people just like that ended up becoming millionaires.
These were new technologies that changed the landscape in their day, and are still with us today—but the prices of those assets didn’t rise forever.
The big and easy money in plastics is long gone. Oil is priced less than half its 2008 high. The same is true of all new technologies; prices eventually roll over. The technology advances, but prices peak and eventually fall to an equilibrium.
History has demonstrated this numerous times. Here’s a few reminders of why crypto winners may want to take some profits while prices are high…
Computers and the internet were new technologies that forever changed our way of life. But the stocks didn’t rise forever—in fact, the tech bubble became the tech wreck, wiping out much of the gains investors were sitting on. Worse, it took the Nasdaq over 14 years just to climb back to its 2000 nominal high.
Those that didn’t take profits from that industry ended up losing their paper riches.
The price of oil has soared and crashed numerous times. This was the most recent. If you owned oil or oil stocks in 2014 and didn’t book some profits, you lost most of your gains.
The financial crisis of 2008-09 erased all the gains from the prior eight years—unless you took some profits off the table.
Even real estate isn’t immune from bubbles and crashes. Numerous books and brokers praised the virtues of real estate—until property values crashed devastated families, banks, and the nation.
The Roaring Twenties led to the biggest stock market crash in US history. Those investors who didn’t book their gains were completely wiped out.
The price of all these asset classes got too frothy, despite many being new technologies or core assets of our society. Eventually prices got too high and crashed. This has occurred numerous times throughout history—no asset has been immune.
Will the crypto industry really be exempt? Keep in mind that many Nasdaq investors felt that way in 1999… real estate gurus in 2006… and stock brokers in 2008. They were all too bullish for too long—prices didn’t go up forever—and those that didn’t take profits when they had them lost much of their investment.
The lesson from history is that no bubble lasts forever. Even the “ascent of man”, perhaps the longest running “bull market” of all, has had devastating detours (the Dark Ages, the Great Depression, the Great Recession, to name a few).
Crytpos are here to stay, no doubt. They’ll continue to evolve, and will alter the way modern-day transactions are done. But prices won’t rise forever. I encourage anyone sitting on big gains in cryptos to book at least some of your profits. That’s exactly what Mike Maloney has done, as he explains in his brand new video, $50,000 Bitcoin in the Next Couple Months?
[By the way, Mike mentions a couple links in his video—here’s the one on Investing in Bubbles; and the Grant Williams article on First Hand Accounts of the ‘87 Crash].
The Secret to Gaining Wealth isn’t Diversification
So where do you put some of those new-found profits? It’s no secret stock prices are frothy. The average house price is now higher than the bubble in 2006. And bonds pay next to nothing, and after a 36-year bull run aren’t exactly risk-free.
Think about how your win in cryptos transpired… I’m willing to bet it happened from two primary things: 1) you put a fair amount of currency into them; and 2) you bought while they were priced low.
There are a number of ways to gain wealth, but those two principles guide almost all of them. It isn’t diversification; it’s concentration. And it’s not chasing an investment, but buying low, before it’s popular.
So what’s out there that allows us to “buy low”?
As of November 3, the gold price is a full one-third below its last peak, and silver nearly two-thirds. There is no major asset class out there that offers this level of deep value.
And where could you concentrate a portion of your new wealth that isn’t already owned by lots of investors?
Gold represents just one-fifth of global assets compared to its 1980 peak. Further, I’ve seen no reputable report that claims any more than 5% of North Americans own any gold, with most reporting figures less than that.
Gold is clearly both undervalued and under-owned.
Gold and silver qualify as one of the best ways to buy low today. Why not put some of your crypto earnings into precious metals? Especially when you consider the enormous upside we think is coming.
We encourage you to add gold and silver to your anti-fiat-currency portfolio. Because…
It’s Not Gold & Silver vs. Cryptos—Its Gold & Silver AND Cryptos
One of the primary reasons cryptocurrencies are so attractive is because they share many of the same characteristics as gold. Bitcoin and other crytpos are divorced from the current monetary system… they’re discreet… they’re transportable, all just like gold. There’s good reason to own both.
However, unlike gold, bitcoin and other cryptos are still in their development stage and thus subject to some growing pains, such as government intervention… low liquidity… limited acceptance… dependent on a functioning internet/electric grid… and still subject to malware and cybercriminals, definitely a growing concern for this industry. Gold Eagles in my possession have none of these concerns.
And here’s an interesting connection you may not have realized: cryptocurrencies need silver to work—cellphones, computers, laptops all use silver in their components.
I encourage all you crypto winners to shift some of your profits into physical gold and silver. And you can do it all in one transaction.
And here’s something hot off the press… the Perth Mint’s brand new coin for 2018 is now in, something I just bought for myself. It’s beautiful, low-priced, and serves as a tangible form of wealth that we’re convinced will grow enormously in value.
I hope you crypto capitalists will join us for the NEXT great financial bubble. Gold and silver are the most promising assets in the market today—you can buy low, and they’ll someday soon sell at multiples of current prices. We think it’ll be a ride not unlike the one you’ve taken with cryptos.
Jeff Clark
Senior Precious Metals Analyst
This article was originally posted in the Strategic Wealth Preservation Blog and copied here with permission of the author.