Real Alternatives to Bitcoin

Bitcoins – should you believe the hype?

I know as a sovereign-minded individual I’d like to believe there’s an alternative to the reckless, money-printing government fiascos polluting global economies.

Just the thought alone of a currency that is not controlled by any central bank sounds too good to be true. However, this idea is not new. Bitcoin is just the most recent phenomenon to hit the streets and investors’ wallets.

And the media coverage of bitcoins couldn’t have come at a better time – when many central banks are advocating so-called stimulus programs, essentially debasing their currencies.

This media-driven craze has enamored the public – it’s fresh, hip and the newest fad. And because bitcoins aren’t controlled by any central bank, the public believes this will somehow make bitcoins more stable.

But other than the lack of central bank involvement, the public is clueless as to whether bitcoins are a safe alternative. And the fact that large financial institutions are steering clear is the first clue to stay away.

Fool Me Once

Ironically, the same crowd that got hammered by the Iraqi dinar is now going after Bitcoin. You would have hoped the public learned their lesson from the Iraqi dinar, which large institutions also avoided like the plague.

Well, we only have to look to the Bitcoin bubble and its recent pop to know that Bitcoin is not stable. I actually predicted this bubble would burst on my Facebook page the day before it burst.

Ok, let’s take a look at a chart of Bitcoin to see what the bubble popping looks like. Pay attention to the arrows I’ve drawn and you’ll see a couple of scenarios that I expect could play out with Bitcoin.

A 79% Crash within a Week!

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The dollar is a poor currency because of the serious value it’s lost over the decades. Now consider this: in just one week Bitcoin lost the equivalent value.

Sure, it bounced back since. But, historically, all bubbles that burst were followed by a secondary crash. From there, the asset struggles for many years.

For comparison, take a look at the chart (below) of the Nasdaq from the 5,000 level on and you’ll see what I mean.

A Sucker’s Rallies

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After the Nasdaq bubble burst, it took around 10 years before it was really worth touching again.

Yet, the sharp rallies that occurred afterward sucked people back into the Nasdaq. That’s why pros call them sucker’s rallies.

Back to Bitcoin. It will most likely never be widely accepted as a valid form of currency. It’s got too many problems. It’s too unstable. It’s subject to the whims of mom-and-pop investors. Few people understand it and most don’t accept it.

Additionally, some that deal Bitcoins and run the exchanges where bitcoins are tracked have run into recent financial troubles. That’s just the start of a whole host of landmines that are in the path of Bitcoin.

The Right Way to Avoid Currency Devaluation & Crazy Central Bank Games

Obviously, we need to be in something more stable than the dollar. Additionally, many central banks of the world are actively devaluing their currencies or talking them down. Either way, they’re in the currency war.

However, everyone isn’t in this currency devaluation game. Our job is to be in with players who think differently. We should be within the ones that don’t get sucked into the vortex of currency devaluation as a seemingly great way to prosperity.

So who is NOT playing the currency devaluation game these days? There are more countries than you might think.

Australia has kept very stable, with a currency that’s appreciating over time. Additionally, its currency earns a 3% interest rate. No other major currency in the world can say that.

The New Zealand dollar comes close at 2.50%, but it’s not quite as major. Nonetheless, this country isn’t devaluing their currency either.

Singapore also keeps a sound currency policy.

Singapore fights inflation by keeping its currency strong rather than by raising interest rates. And its inflation has been on the higher side looking at their historical inflation data. I know they will be cautious and keep their dollar strong as a result.

Norway doesn’t devalue its krone. In fact, Norway is one of the most fundamentally sound places on the face of the Earth, due to its overall economic health. That alone helps to keep the krone well supported.

You’d think everyone in Europe would be in sad shape, but you have to look no further than Sweden to know that’s not the case.

In fact, with the economic weakness that’s engulfed much of the euro zone, many have avoided the euro and pound all together. Even the Swiss want to weaken the franc. With very few places to turn to in Europe… Sweden’s krona remains strong.

Finally, one of the future main currencies of the world, the Chinese yuan, is another currency that has remained stable due to its fast economic growth. China is growing at a rate of 7.7% when much of the world is struggling with growth of 1-2% or even less. So it’s still standing head and shoulders above the rest of the world economically. The confidence in the yuan is very high as a result.

So when you’re looking to invest in a currency, don’t go for the fads like Bitcoin. Instead, go for sound currencies around the world like the ones mentioned above. These are the best ways to avoid currency depreciation and central bank madness.

Have a nice day!

Sean Hyman
Editor, Currency Cross Trader