Bitcoin, gold and silver are among the winners of 2020. Even investors who normally favor stocks have to acknowledge this without envy.
Bitcoin has risen 92% since the beginning of the year. For gold, a plus of 26% is on the list over the same period. Surprise winner silver is 35% more expensive today than at the beginning of the year (all figures as of November 4th, 2020, all values compared to the US dollar).
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In contrast, many stocks look pretty pale. Yes, there were some positive surprises on the stock market too. But the overall market remains below its potential this year. The DAX is around 9% in the red for 2020.
Bitcoin, gold and silver in – stocks out. Intelligent investors could now easily regroup. But be careful! Bitcoin, gold and silver have their own challenges. We see intelligent investors using trading bot like Bitcoin trader to surf this new bull market.
Better not buy the year’s winner
Buying the winner of the year has always been a questionable decision. In 2017, the DAX was able to deliver an above-average return of around 13%. In the following year, the leading German index closed with a loss of around 18%.
The game also works in the opposite direction. A bad quarter can cause the price of a stock to plunge into the abyss in a flash. But after a terrible quarter, an average quarter often feels like a landslide victory. From depression straight to exaggeration – no problem!
Bitcoin, gold and silver have long dominated the roller coaster of the courses. With Bitcoin, regular double-digit crashes are more the rule than the exception. Gold and silver sometimes produce excruciatingly long bear markets that drive investors to despair for several years.
Pronounced bear markets would not be a problem if at least a small consolation prize in the form of a dividend would flow into the cash register. But lazy asset classes like Bitcoin, gold and silver don’t deliver that.
Bitcoin, gold and silver: stressful or useless
But even hoarding comes at a cost. Anyone who wants to keep gold and silver in physical form needs a good hiding place, a tightly screwed safe or worse.
Bitcoin requires at least a professional safekeeping of the private key. That sounds easy, but in reality it is a challenge. How do you keep a string of characters without being damaged by the forces of nature or noticing another person?
Fortunately, you can leave the safekeeping to the professionals. Instead of physical gold and silver, you can simply put the corresponding ETC (exchange-traded commodities) in your depot. The Bitcoin is left bluntly on the exchange where you bought your Satoshis.
But anyone who gets a third party on board for custody makes the same mistake as extremely broad-based ETF investors. If you buy all shares, you end up buying none at all.
Investors hoarding Bitcoin, gold and silver fall into a similar trap when handing them over to central custodians. Essentially, these asset classes are particularly suitable as protection against the financial system. The logic of placing these asset classes in the care of institutions of the financial system is not apparent to me.
Is it really worth it?
Yes, you can get rich with Bitcoin, gold and silver too. This is proven by the dream returns of 2020.
But the return is by no means free. If you want to do everything right, you have to expect stress, tears and problems.
Is it still worth it when the prices of Bitcoin, gold and silver plunge again? Everyone has to answer this question for themselves.
For my part, I prefer stocks in great companies. Those who pay on time even when there is a pronounced lull. Yes, there is such a thing!