All That Glitters Is Not Gold… Not Even Gold!
By Diana Pires ₿ on ALTCOIN MAGAZINE
It’s been a long-standing irritation of mine; the comparison of Gold (XAU) and Bitcoin (BTC). The catalyst for the battle of the “Golds” was the 2017 BTC price surge, which saw 1 BTC trade for the same value as a troy ounce of Gold — slightly more in fact but who’s counting.
Since then we’ve been inundated with both arguments for and against their likeness, here are some:
For
Scarcity:
Both Gold and Bitcoin have a limited supply. Bitcoin is limited to 21 million coins of which over 17 million have been mined according to CoinMarketCap. In the case of Gold, according to US Money Reserve mining has been in decline for the past 20 years. As the vast majority of Gold dwells in the Earths’ crust there are many contributing factors that render it “limited” — production cost, finite amount of surface (Earth), accessibility.
Alternative Speculative Investments:
Both Gold and Bitcoin are widely considered to be alternative investments to the more conventional cash/equity/income markets — both are often sought as safe havens in their respective markets. Their speculative nature raises some concerns as Ben Bernanke stated in Congress in 2013
“No one really understands gold prices”,
the same can be said for Bitcoin.
Where the aforementioned conventional markets are valued against interest or earnings, Gold and Bitcoin (and many will disagree) are largely speculative.
Kings:
Both Bitcoin and Gold dominate their markets — for the time being.
Against
Exchange/Currency:
The “Gold Window” was slammed shut in 1971 when Nixon did away with the Gold Standard. So, Gold is not regarded as legal tender whereas Bitcoin can, in fact, be used as a medium of exchange, presenting itself as far easier to utilize and transact with. Now, that which is undeniable is that Gold has proven itself to be the ultimate survivor and armor against crises. Lest we forget 2009 where we saw S&P500 -56.8% and Gold +25.5% to name but a few.
Demand:
According to the World Gold Council, Metals Focus, GFMS-Thomson Reuters from 2012–2017 over 50% of Gold demand was attributed to jewelry. Which is where the two differ massively, much of Golds value is tied to its precious properties and splendor. Two things Bitcoin clearly lack.
Volatility:
Bitcoin is incredibly volatile — the market has seen over 1,000% bull runs which raises questions around stability and store of value. Gold, however, has steadily increased in value and maintained an overall stable level of purchasing power.
Liquidation:
The electronic nature of cryptocurrencies means that Bitcoin trumps Gold in terms of ease of selling your assets. Whilst ETFs and derivatives speed up the selling process when trading Gold — Crypto is a 24/7/365 market.
It would be foolhardy to deny the value of Gold not merely as an investment but as a hedging mechanism — what we should not do is blindly and strictly adhere to status quo methods of investment and engulf innovative ones with them.
Finally, it seems as though crypto-lovers will have been somewhat purged of the comparison as we learn of fake bullion infiltrating world markets. On 28th August 2019 Reuters reported “A forgery crisis is quietly roiling the world’s gold industry” as we learn of at least 1,000 forged bars of bullion resting in the vaults of JP Morgan. For the last 20 years, we’ve seen an unabatable Gold rocket ship that is strongly correlated with an increase in counterfeiting, which ironically raises money laundering red flags.
For an asset with zero counterparty risk, we’re now left deliberating over whether or not what we hold in our vaults is worth anything at all.
So, let me offer one final point against — try though you may, you cannot counterfeit Bitcoin.
It can, of course, be exposed to a double-spend attack, though this is an incredibly arduous task — does that make Bitcoin a far less terrible store of value than Gold? Maybe, maybe not.
The point I am making here is that one cannot substitute the other — whilst Bitcoin has many attractive attributes it is not perfect.
In summary, like Biggie and Pac they’re both great but unparalleled.
Diana Pires — Global Head of OTC Sales, B2C2 Ltd
