December 19th, 2017


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Getty Images

Bitcoin Is Nearing a Bubble Top, While Gold Is Growing Steadily

by Mike Fuljenz, Universal Coin and Bullion

In late October 2017, the Chicago Mercantile Group (CME), the world’s biggest exchange group, said that it plans to launch a futures contract for bitcoin, a worldwide cryptocurrency and digital payment system, by the end of 2017—a very fast-track launch. At the time of that announcement, bitcoins sold for $6,000 each, but the price of bitcoins soared 20% in the next two days, surpassing $7,300. Novice investors are looking at bitcoin as a replacement for the historical role of gold, but they can take a lesson from long-time gold bugs about how “bubbles” are created.

In August 1974, shortly after United States President Richard M. Nixon resigned, his successor, President Gerald R. Ford, signed a bill allowing Americans to own gold by the end of 1974. In the intervening months, foreign buyers poured money into gold, doubling its price from $95 per ounce to $197 per ounce. But on Dec. 31, 1974, foreign sellers unloaded their gold on American buyers. The price of gold plummeted $45 in a week and fell to $103 by September 1976. Gold did not reach its 1974 high for four years. By 1980, long-term holders of gold were rewarded, but speculators were washed out by gold’s first bear market decline of 1975-76.

Read the full column in the January 2018 issue of COINage.

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