SummaryBitcoin is a little bit crazy, but it is becoming clearer and clearer that growing numbers of people are putting more and more money into it.Bitcoin may not be a wise store of wealth, but it is reaching critical mass and achieving Facebook-style dominance in size and "brand name" recognition.An even 1.0 Bitcoin to Gold Ratio was strong resistance for a long time, but now bitcoin has broken above it and the gold price may act as strong support.Bitcoin has been acting like gold, not silver.And if bitcoin even began to move closer to the total market value of gold, the bitcoin price could soar.I must conclude that it makes sense to buy a little bitcoin - even if you and I think it's inherently worthless!So there's this crazy new form of money that's not a currency or a metal, it only exists online...it's called Bitcoin, you may have heard of it.Why would anyone in their right mind store their wealth in such a form, that has no tangible real-world existence outside of the Internet, that is not issued or backed by any government, that has no physical or legal inherent worth or value?

For me, these are not just rhetorical questions.I do think Bitcoin is a little bit crazy.But the reality is, it is becoming clearer and clearer that large and growing numbers of people around the world do believe in Bitcoin.bitcoin is worthlessThey are putting more and more of their money into it, and right now the total present market value of all the world's Bitcoin is over $28 billion, almost double the total present market value of all the world's silver.litecoin recordThe purpose of this article is not to argue about the wisdom of people storing their wealth in Bitcoin.bitcoin-qt on tailsI don't think it's wise.bitcoin price bitcointalkBut I recognize that people are doing it anyway, and it is reaching a critical mass, and it is dominating other forms of digital currency both in size and especially in "brand name" recognition, similar to the status that Facebook (NASDAQ:FB) achieved in social media around say 2008.bitcoin nasıl alınır

In 2013-2014 the price of Bitcoin soared, peaked, and crashed.At that time it could have been thought of as a modern-day Dutch tulip craze.But Bitcoin didn't go away like Dutch tulips.bitcoin price history raw dataIt stuck around at a more modest price, and over the past year Bitcoin has come back with a vengeance.It rose from $500 to $750 after the Brexit vote last June, from $750 to over $1,000 after the US election, and in the past month it has soared from $1,000 to over $1,700: [Note to readers: All charts below are from the day before the market turmoil of Wednesday, May 17, sent both the Bitcoin and gold prices higher.An update section below addresses the performance of Bitcoin and gold on May 17.By the end of this week or the beginning of next week the prices may be the same or 5% higher or 5% lower, but the overall trends described here are likely to remain intact.] I prefer to focus on the price of Bitcoin compared to that of gold [SPDR Gold Shares (NYSEARCA:GLD)], the Bitcoin to Gold ratio, if you will.

As potential stores of value and wealth outside of the direct control of governments, unlike currencies that can be devalued at any time, and as assets that function in practice as "safe haven" investments, it is natural to compare Bitcoin and gold.Here is the big picture -- a chart of the Bitcoin to Gold ratio from 2012 up to the present: This chart shows us that an even 1.0 Bitcoin to Gold ratio, at which 1 Bitcoin has the same price as 1 ounce of gold, has been a critical level in the price history of Bitcoin.That level was the peak and the end of the first big Bitcoin rally in late 2013.That level also acted as strong resistance in the post-US election rally last December and again this February-March, as a close-up of the Bitcoin to Gold ratio over the past year shows: But in the current rally this month, the Bitcoin to Gold ratio held that 1.0 level and then blasted far above it for the first time: Given the past history of the 1.0 Bitcoin to Gold ratio level as resistance, I think this latest breakthrough has added significance.

I fully recognize the danger and the risk that the current Bitcoin price rally may be a bit of a bubble and that a sharp correction may well be due.But given the This would offer at least some possible downside protection for investors who buy during the current rally.Bitcoin Is Acting Like A Gold Proxy The upshot of all these charts is that Bitcoin is acting like a gold proxy.It may rise or fall above or below the gold price here or there, like platinum does, but the Bitcoin price is acting like it is related to the gold price.This is happening regardless of whether you or I think Bitcoin has or should have any inherent value or not.For comparison, the price ratio of Bitcoin to Silver is blasting through level after level as if silver [iShares Silver Trust (NYSEARCA:SLV)] is totally insignificant and irrelevant compared to Bitcoin: From 40:1 to 60:1 to 80:1 to 100:1, look at the Bitcoin to Silver ratio soar!Again, I'm not saying that Bitcoin will hold these levels.I'm just observing that the Bitcoin price is acting like it is far, far more valuable than silver.

I mentioned earlier in the article that the total market value of all Bitcoin is now almost double that of all the world's silver.But it is still only a tiny fraction, about 1/300 or less, of the estimated value of all the world's gold.And yet as I have demonstrated, Bitcoin is acting like a gold proxy.If this is the case, then there is the potential that its value could rise to the point where its total market value is closer to that of gold than it is to that of silver.If this happened, the price of Bitcoin could be 10 to 100 times higher than the current price (on the order of $20,000 to $200,000 for 1 Bitcoin).This is not a prediction, just an observation of one possibility based on the logic of this analysis.As I write this article, we see the performance of Bitcoin and gold in action as safe haven assets during the US and global market turmoil of Wednesday, May 17, in reaction to the political concerns in the US around Trump, Comey, and Russia.This is only one day, but it is interesting to take a quick look at Bitcoin's performance compared to gold and silver on such a day: As you can see, Bitcoin has held its own and outperformed gold by a few percent, and silver by more, on this strong day for global safe haven assets.

Of course, as I said above, this is only one day.But it is worth noting.Conclusion: Buy A Little Bitcoin Having studied the Bitcoin price history and the Bitcoin to Gold ratio, I have concluded that the gold price offers solid potential support on the downside, while the upside could be very, very high.From this perspective, the risk/reward profile surprisingly (to me) begins to look rather appealing.So I must conclude that it makes sense to buy a little Bitcoin, even if you and I think it's inherently worthless.Now I cannot do or recommend anything like a 10% allocation to Bitcoin.I think that would be crazy.Bitcoin is not gold.Bitcoin may be likely to hold the level of the price of an ounce of gold, but gold is guaranteed to hold the value of an ounce of gold.But a 1% or 2% allocation to Bitcoin makes a lot of sense to me.You won't be financially ruined if Bitcoin goes bust.But you do get access to a distinct and unique asset class, which may act like a safe haven asset, which may also have the potential for long-term gains, and which may serve as one additional diverse part of a diversified portfolio, uncorrelated with other assets.

Now, briefly about the question of how to buy Bitcoin.The only way to do so within a brokerage account is the Bitcoin Investment Trust (OTCQX:GBTC).However, with each share of GBTC representing about 0.093 of a Bitcoin, you are paying a significant premium over the spot price value of Bitcoin itself.Last week these authors on Seeking Alpha pointed to this irrational skyrocketing premium.At that time the premium was around 50%; now it is around 25%.You can save yourself some money by learning how to buy Bitcoin on a digital currency website such as Coinbase, for example.If you click on this link to do so and buy at least $100 worth of Bitcoin, you and I will both get $10 worth of Bitcoin free.However you choose to invest in Bitcoin, I think a modest investment makes good sense.Even if you and I will always believe that Bitcoin should be worthless!Disclosure: I am/we are long BITCOIN, GBTC, PHYS.I wrote this article myself, and it expresses my own opinions.I am not receiving compensation for it (other than from Seeking Alpha).