Since we started accepting bitcoin as payment in collaboration with BitPay, I’ve received a number of questions from our customers who were concerned that we might be taking part in cryptocurrency speculation.
That’s not true. And as the CEO of the Hard Assets Alliance, I felt the responsibility to clarify why we launched this service, which seemed to send a mixed message to our customers.
Long story short, a small number of our Hard Assets Alliance customers asked for the ability to buy gold with bitcoin. Some of them speculated in cryptocurrencies and wanted to allocate part of their gains to a tangible asset like gold.
To accommodate those customers, we partnered with cryptocurrency exchange BitPay and added a bitcoin funding option. Surprisingly enough, within hours after launching this feature, we have had several customers funding their accounts with bitcoins and buying precious metals.
But to make it clear, the Hard Assets Alliance is not trading bitcoins, nor are we getting any exposure to the risk associated with the bitcoin price. We only provide our clients with an option to fund their accounts with this cryptocurrency.
So here’s how it works.
When a customer asks to fund their account and buy gold or other precious metals with bitcoins, they send us the details on how many bitcoins they would like to exchange into US dollars in order to buy precious metals.
Then they receive an invoice from BitPay that indicates exactly how many dollars they will get for their bitcoins.
If the customer agrees on the exchange rate, BitPay processes the transaction and exchanges bitcoins into dollars. Bitcoin is very volatile and if it drops or climbs afterward, the customer will still get the amount of dollars agreed at the time of the order and the transaction will proceed as agreed.
That amount of dollars is then added to their SmartMetals account where the customers can use them to buy precious metals.
Rest assured that the Hard Assets Alliance would never speculate on the price of bitcoins. We have a fiduciary duty to all of our customers and all of our transactions are 100% hedged.
While bitcoin is more speculative and volatile, its processing is no different than that of physical gold or silver.
Our customers agree to buy a certain amount of gold for an agreed amount of dollars. If the gold price changes after the transaction has been processed, the customer still gets the quantity of precious metals agreed upon at the time of the transaction.
It can work either in their favor or against them. However, since precious metals are usually not very volatile on an intraday level, the price difference is usually slim.
I appreciate your concern, and I hope this clarifies why we are offering this service.
Now let me tell you why you should consider allocating some of your funds invested in bitcoin to gold.
Careful research and hard data show that the monstrous returns from bitcoin are driven by speculation, not its transformative potential. In fact, most investors are buying bitcoin with the hopes of getting rich quick. And the media is partly to blame for this.
However, a cryptocurrency built on the blockchain technology is much more than a speculative instrument. It has potential to be legal tender and a substitute to fiat currencies controlled by central banks.
While potential is big, such a paradigm shift in the financial system won’t happen overnight. That means today’s bitcoin price is driven by faith, not fundamentals and logic. And that’s the biggest risk of holding bitcoin. It has no intrinsic value and is by no means a store of value.
Any unexpected event that reduces faith in bitcoin can result in a massive exodus from cryptocurrencies, sending bitcoin down.
For this reason, you have to acknowledge that investment in bitcoin is sheer speculation and act accordingly. This means you should invest only a small portion of your funds that you can afford to lose. You shouldn’t treat it as insurance against currency devaluations or instability in the fiat system.
Meanwhile, if you are looking to invest in assets with intrinsic value to hedge against currency devaluations, look no further than gold. Gold has served as a store of value since the dawn of humanity. From a long-term perspective, its price has always appreciated and has never gone to zero.
While I believe in the transformative potential of the blockchain technology, it’s still in the very early stages. Today’s cryptocurrencies have no fundamentals to compete with fiat currencies, nor are they going to be allowed to do so by governments.
This whole situation reminds me of the period leading up to the dot-com bubble.
At that time, the Internet was taking its first steps, promising to change the world for good. And it did. But it took two decades and the first wave of companies—such as Pets.com or AOL that led the Internet revolution—eventually plunged into oblivion.
The same could happen to bitcoin and other cryptocurrencies that are taking the lead in the cryptocurrency boom today.
If you have any further questions, drop me a line at Olivier@hardassetsalliance.com and I’ll respond to you personally.
If you’re interested in buying precious metals with bitcoins, simply call our friendly customer service representatives at 877-727-7387 (toll-free within the US) or 602-626-3022 (for international callers). Office hours are Monday to Friday, between 7:00 AM and 4:00 PM Arizona Time. They will collect from you the information required for BitPay to process the transaction.
Olivier Garret, CEO
Hard Assets Alliance
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