Yesterday, I wrote to you about the reasons why I believe gold will continue to be a good hedge in the current environment of rising inflation and market volatility.

And as it has been around for over 5,000 years, I am confident that it is a store of value that will continue to stand the test of time.

But what about one of the newer assets I’ve recommended – Bitcoin?

It’s down 55% this year. And I know some readers hold this digital asset in their portfolios. If you’re one of them, you may be wondering what to do…

Or if you’ve been considering getting into Bitcoin, its recent price action may have caused you to hit the pause button.

Reader Jon J. wrote in recently with a question that I’m sure echoes the thoughts of many readers…

Why take a chance on Bitcoin? Gold is a proven long-term inflation hedge. Gold has been money for centuries. If gold was $20,000 an ounce and Bitcoin was $1,800, maybe it would be different.

So today, I’ll show you why I believe it makes sense to “take a chance on Bitcoin.”

Why Take a Chance on Bitcoin?

Now, Jon isn’t alone in being skeptical about Bitcoin. And I’m sure the recent volatility in the market hasn’t helped persuade him about its viability as an investment asset.

I get it.

Bitcoin has only been around since 2009. It’s still a very new asset. And its price volatility limits its use as a form of payment.

In a recent update, I explained the events that have rocked the crypto market these past few months – from volatility in so-called “stablecoins,” to trouble in crypto lending markets.

Unfortunately, though not connected to these stories, Bitcoin has suffered by association.

But even with the recent volatility in the crypto market, I believe there’s still a strong case to be made for having some Bitcoin as a speculative asset in your portfolio.

So today, I’ll outline the reasons for my positive outlook.

Historical Record of High Gains

First, let’s take a look at Bitcoin’s historical track record…

Bitcoin finished 2021 at around $48,000. That was up 70% year-over-year.

And Bitcoin is up 121% over the last two years. So, if you invested $1 in Bitcoin two years ago, you would have roughly $2.21 today.

A $1 investment in Bitcoin four years ago would be $3.08 today. That’s a 208% gain.

And the further back you go, the higher that gain, as you can see from this table…

2 years 121%
3 years 83%
4 years 208%
5 years 690%
6 years 2,937%
7 years 7,542%
8 years 3,156%
9 years 30,963%
10 years 310,094%

Source: Woobull Charts

And yet, in all these years, Bitcoin has already been declared dead 459 times, according to the website

But not only has Bitcoin proved the naysayers wrong every time… it has always emerged stronger than before.

In fact, if you invested $1 in Bitcoin on October 6, 2009, when Bitcoin first had a market price, you would have roughly $26.8 million in your bank account right now. Not bad for an asset that has “died” more than 450 times!

Now, we probably won’t see similar gains in Bitcoin in the future.

But if Bitcoin’s history is anything to go by, it’s fair to say that having some exposure to it gives you a chance at higher returns in your portfolio.

Solid Inflation Hedge

And despite the recent pullback, Bitcoin is still a great inflation hedge.

Just take a look at this chart of the U.S. dollar priced in Bitcoin (BTC).


In November 2011, one U.S. dollar would buy half a Bitcoin.

Today, that same dollar can only buy about 0.00005 Bitcoin.

In other words, the value of a single Bitcoin (as measured in U.S. dollars) has appreciated by 999,900% in just over a decade.

Meanwhile, the U.S. dollar has lost about 30% of its purchasing power over the same time.

Bitcoin’s Big-Picture Outlook

Now, it’s true that there have been periods in Bitcoin’s history where you would have lost your shirt, had you bought and subsequently sold your Bitcoin at the wrong time.

And, as I write this, the price of Bitcoin is still down 70% from its November 2021 all-time high of about $68,000.

I know this volatility can be hard to stomach. But a lot of this volatility argument also applies to gold.

For instance, between August 1971 and January 1980, our favorite precious metal rose nearly 20x to peak at $843 per ounce. It then dropped 66% by February 1985.

And for those who bought it at $843 in 1980, it took until January 2008 to recover to that same level. That’s 28 years.

But from July 1999 to August 2020, it saw an eight-fold increase to $2,062 per ounce.

So gold has proven to be a good investment over the long term, despite lots of volatility along the way.

This is why I’m skeptical when someone points to Bitcoin’s year-to-date performance in 2022 as proof that its inflation hedge narrative has fallen apart.

And as I explained in my recent update, there are several key reasons why Bitcoin still has room to grow.

With a cap of 21 million Bitcoins, the supply is finite. And the halving of the Bitcoin reward for miners every four years means the supply of new Bitcoin will continue to reduce over time.

The same can’t be said for the U.S. dollar…

And don’t forget, the White House recently acknowledged cryptocurrencies as a legitimate and important part of American society and the U.S. economy.

As I wrote to you at the time, President Biden’s Executive Order on cryptos makes it clear that the U.S. believes cryptocurrencies are here to stay. And that it wants to position itself as a leader in the space.

In short, it legitimizes cryptos.

So it’s important to look at the bigger picture and Bitcoin’s long-term prospects, not just its recent performance.

What This Means for You and Your Money

I still believe that holding Bitcoin alongside gold in your long-term investment portfolio is the pragmatic thing to do.

My advice is to put a fixed amount of money into it on a regular basis, typically monthly. This is called dollar-cost averaging.

The benefit of this approach is that it allows you to buy more of it when the price is low and less of it when prices are high.

PayPal or Block’s (previously called Square) Cash App may be the most convenient options for doing this. With these popular apps, you can start your Bitcoin portfolio with as little as $1.

That said, you should never put all your savings into crypto (or any other asset, for that matter). A diversified portfolio is the best way to protect your wealth in times of volatility, like we’re seeing today.

You should also never borrow money, or leverage yourself, to buy Bitcoin. You should only invest money that you don’t need to use right now, and that you can position for longer-term investments.

Bitcoin is a volatile asset. This makes it a riskier investment than gold. The value of Bitcoin can fluctuate wildly by the day and even the hour.

So you should be completely comfortable with the volatility that comes with it.

Until tomorrow,



Nomi Prins
Editor, Inside Wall Street with Nomi Prins

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