The world is changing. Traditional structures that my generation of fifty-somethings took for granted are being chipped away. None more so than how the younger generation views investments, buying houses and planning for the future. Getting on the housing ladder does not appear to be so important for millennials. Neither does paying into a pension for 40-odd years. But, ask them if they would rather have a bar of gold or the equivalent in Bitcoin and the answer makes one ponder…
Gold has always held allure for humans. Even our language has evolved around this precious metal. We talk of “gold stars” for work well done, there is the “gold standard” for equipment or services and, of course, something that makes us highly profitable is referenced as “liquid gold”.There is a value in gold also. It is a finite resource. The World Gold Council estimates that all the gold ever mined totalled 190,040 metric tons in 2019. We cannot conjure up more. Therefore, people store value in this precious and non-manufacturable metal. Hence its use as a safe haven for investors in recent decades.
The price of gold as I write this piece is $1,312 an ounce. In new money that is $42 a gram or $42,000 a kilo. It is relatively stable, albeit it can be susceptible to the vagaries of the market. Yet, ask a millennial near you if they would rather own $1,312 of gold or $1,312 of Bitcoin and the answer, it seems, is overwhelmingly the latter. And this is impacting traditional investment houses, whose millennial clients want Bitcoin as part of their portfolios. In the US, for example, the Securities and Exchange Commission (SEC) will not allow this. So, Bitcoin is purchased via digital brokers or digital exchanges and held separately. But, change is coming.
The US investing industry stands on the precipice of a dramatic upheaval that could see Bitcoin and other cryptocurrency assets replace gold in investor portfolios. That’s according to Nate Geraci, president of the ETF Store, an independent investment advisor. He revealed in a Bloomberg TV interview that his clients are clamouring to hold Bitcoin in their portfolios – if only the SEC would let them. Geraci stunned his fellow panel members when he said 90 per cent of millennial investors desire to hold Bitcoin instead of traditional hedge assets like gold.
“When we talk to our younger clients – we have a core gold allocation in our portfolios, and they’ll ask about that and say, ‘What about crypto?’ And if you talk to, primarily millennials, and ask them which they prefer, Bitcoin or gold, it’s a landslide.”
Of course, this is not based on pure scientific evidence, but the younger generation’s investment appetites are different and will need to be catered for – somewhere. They see the likes of the Winklevoss twins making millions from Bitcoin and they know about Satoshi Nakomota and guys like Tim Draper. Just like Extinction Rebellion who want complete change in regards to climate, younger investors want progress in the cryptosphere.
Alt-coins have a limited supply and could be put to use as part of their respective value propositions. Bitcoin is very limited; however, it is hugely volatile. It has moved from $3,000 to $19,000, back to $5,000 and now to $8,000 over a two-year spell. This is scary for many investors, but presents opportunity for others.
The question is: would you rather have a gold bar in your hand or the equivalent stored in a digital wallet? For millennials the gold bar represents history, centralisation and the old guard. In short, it will probably be worth the same in ten years and maybe even make then something. But the Bitcoin could be worth 20 times that - if not more. So, the decision for many millennials is an easy one, albeit they accept it could be worth a big fat zero, too. They would take the Bitcoin, wait for evolution, decentralisation and scarcity to add value to it, then buy their house cash, while having plenty more in the digital pension pot.
Yes, times are definitely changing.
- Jim Duffy MBE, Create Special