Gold Diversified: Gold On The Blockchain
There is a British artist called Martin Creed whose work I like. One reason I like Creed’s work is that he steers clear of connecting his work to some esoteric philosophy, like many artists (unsuccessfully?) do these days. Instead, the underlying theme for a lot of his work is indecisiveness and the fear of making the wrong decision. So, for example, rather than committing to a particular colour palette in a painting, Creed will use all the colours available in a pre-made painting set (like which, shown in the painting below). This way, he avoids the anxiety of making the wrong decision and fretting over the opportunity costs.
What does this have to do with Gold?
The connection I am making between Martin Creed and Gold is this:
There are many different methods for investing in Gold. When you can’t decide on the best investment type or don’t know how to evaluate the best decision, perhaps it’s best to go with them all.
Like the strategy of diversifying a complete investment portfolio, you can diversify the subsections of your portfolio. In the case of Gold, the different investment options all have their specific benefits and drawbacks, incentivising diversification in the asset.
There are traditional options to gain exposure to Gold, such as physical bars and coins, ETFs, shares in mining companies, and CFDs. But a few new blockchain options have cropped up in the recent past, which could require some attention.
Diversify into Blockchain Gold?
Blockchain Gold comes in two primary forms.
The first is the ubiquitous Bitcoin, otherwise called Digital Gold. While not precisely ‘Gold’, the asset has recently rebranded itself as a store of value and is seeking to usurp some of the bullion market. It is safe to say that if you had diversified into this ‘Gold’ at any time in the past three years (excluding the past month), your returns would have been incomparable greater than the traditional investments listed above. In this respect, I’m sure this missed opportunity has caused many investors anxiety or regret.
Tokenised Gold is the second blockchain option. It is, as its name suggest, tradable tokens backed by physical bullion held. The gold is typically stored in Central Bank-grade vaults. The advantage of tokenised Gold over physical Gold is improved liquidity. Granted this is predicated on demand for tokenised Gold and the network security remaining. However, ETFs offer a very similar product without the wild-west aspect inherent in the crypto-sphere. Even so, tokenised Gold took off in 2020, as illustrated by the above graph by Arcane Research.
Last note: Invest in art instead?
Perhaps an investment in the art of Martin Creed or other artists is preferred over Gold. After all, art investments’ have essentially outperformed all investment vehicles over the past few decades. Not to mention, if diversifying is your game, then the art world has your back. For example, at your local art fair, you could pick up a conservative landscape painting, while at the same time, something akin to a sculpture consisting of a banana taped to the wall.
The FX market is expansive. There are seven major pairs and over 70 crosses! How can one person possibly keep track of everything and identify the best pairs to trade at any given time? That’s where the correlation matrix can come in handy. Most traders, when exposed to the word “correlation”, automatically think of intermarket analysis.
A theory: Elon Musk will hand Tesla Inc (NASDAQ: TSLA) over to a successor when Tesla can no longer generate much fanfare. At least, not as much as they currently do. This point in time will come once legacy car manufactures are firmly entrenched in the EV space. It is likely General Motors Company (NYSE: GM), Stellantis NV (BIT: STLA), and the dominant Asian brands will outcompete Tesla on price, range, and looks. Consequently, Tesla will be relegated to a periphery player. If legacy car brands convert their production to EV as fast as they say they will, I expect Musk will move on to his next project before 2030.
Litecoin, while being one of the most successful original altcoins, has generally been overlooked by crypto investors over the past couple of years. However, in 2017, Litecoin was on top of the world for many reasons. For one, it enjoyed a comfortable position within the list of the top ten cryptocurrencies. For another, the coin’s founder, Charlie Lee, was one of the most popular crypto personalities on Twitter (NYSE: TWTR), able to move markets with a single tweet.
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