The CEO of asset management firm US Global Investors and HIVE Blockchain Technologies, Frank Holmes was asked about one of the hottest Bitcoin vs Gold debate. Frank pointed out that bitcoin should not be seen as something that will replace gold. He also pointed out the volatile nature of the young blood millennials, who should learn about the gold ‘Love Trade’, rather than joining the bitcoin space and lambasting the traditional financial standards stating:
[Millennials] should do their homework, they should open up a history book on why gold is so significant… why the great ‘love trade’, that if you love your country you should have gold in reserve. If you have a crisis, your paper money goes down in tremendous value. Gold is what bailed out Britain, getting it over to Canada, and then trading to get weapons from America, it was gold that did it.
Post 2008 financial crisis, put forth the need of an alternative financial system. As the banking system dwindled, bitcoin rose to the scene and presented forward a decentralized peer-to-peer global digital currency, free from the control of a central controlling party.
The debate of bitcoin vs gold is becoming a never-ending one in the financial and crypto world with each passing day. Relatively young and tech-savvy people usually support the bitcoin concept while conservative and traditional financial gurus with the likes of Warren Buffet, dismisses the digital asset completely.
Both the parties present forward their strong arguments and both stand correct in their own respective narratives. But instead of just a simple disagreement, the debate often takes heated turns, with either of the sides usually lambasting the other one for presenting forward a false perception of the financial scenario. Particularly, the pro-bitcoin bloc is the one which is often seen as the more rebellious and intolerant of the other. Is there a middle-ground that can be found between both the parties or the war needs to end with one half subduing to the other?
Just recently, Grayscale Investments’s DropGold ad, attracted a lot of attention as it put forward the rivalry between gold and bitcoin out in the open. The Ad spewed controversy, just as the blockchain week was taking place in the state of New York with mega-events like Consensus, which involved participation from well known leaders of the crypto industry under its banner. The ad puts emphasis on investing in bitcoin instead of gold as it provides actual utility, unlike gold as suggested, and is a modern form of asset class with strong technological backing.
While talking to BlockPublisher, the CEO and founder of Cryptobuyer, Jorge Farias, made a more pro bitcoin picture against gold. In his view, bitcoin is going through its evolutionary phase, just like gold;
According to his initial conception, we believe that gold historically began to be valuable because people treasured it, then because of its decorative qualities and wealth demonstration, and nowadays even for its applications in technology and medicine. Bitcoin is seeing that same evolution and will eventually become a standard and benchmark measure.
The importance of bitcoin being a new technological innovation cannot to be denied at all. But despite the large strides that the digital asset has made over the past decade in terms of its growth, the need is to understand that this space is still relatively new and filled with severe shortcomings as compared to the traditional financial system that has evolved over centuries. Surely it isn’t free of its demerits as banks are essentially termed by some as the evil entities of the modern financial world because they operate on a simple factor of ‘debt’. Although bitcoin is hailed as revolutionary by its staunch proponents in the sense that it will overthrow the banking system, can its role be more defined as reformatory than revolutionary?
Gold has been around since the beginning of time. In the past, it has directly been used to trade and buy goods since there was no concept of banks or paper money. But as the world evolved, the concept of paper money “backed by” gold became prominent. Since paper money provided more ease in terms of handling and utility, its usage in the world become more prevalent than trading gold itself directly. Although it still carries value in the society upon which everybody agreed and agrees even now. Gold carries value intrinsically and also because people believe it is something that carries value.
Initially, bitcoin’s use-case was largely driven by its usage in illegal marketplaces, such as the dark web, and fraudulent activities like money laundering, scams etc. But over time, positive developments have been made in both technological and legislative fronts making this asset more trustworthy in the general public’s eye.
Although there is no physical backing of the asset, bitcoin still carries value in the digital space. With a lot of capital flowing into the blockchain world, the attraction of digital assets has grown for the investors and bitcoin leads in this regard, being the biggest cryptocurrency. It rivals gold in terms that it provides value storage, just like gold. It is often termed as the “digital gold”. Still, bitcoin’s major role as a digital currency or as the digital gold is still somewhat blurry. But is bitcoin digital gold? Here is what people involved with this space have to say:
Bitcoin is not digital gold but is merely an digital ledger entry that tracks the transfer of the ‘digital entry’ on the block-chain ledger. There is no actual gold backing for any bitcoin. Gold trades at $1300 an ounce based on supply demand of the underlying commodity. Bitcoin trades based merely on speculators that attempt to guess whether the demand for a single Bitcoin will increase or decrease. – Attorney & CEO of LegalAdvice.com, David Reischer
Bitcoin can be considered as the new digital gold as it presents a low correlation during extremely volatile periods, especially stock market crashes. However, gold is still important for portfolio risk management. Actually, both Bitcoin and gold can be used together (in the same portfolio at the same time) to provide diversification benefit for investors. – Professor François Longin from ESSEC Business School
All in all, gold has remained to be the standard of representing value since old ages. Although bitcoin is progressing at a very rapid pace riding on the technology-tide, it would be unfair to term it as a replacement to gold. Gold has its value and will probably carry it forward since technology can only be trusted to a certain extent. The need is for bitcoin enthusiast to act more mature towards gold. Gold and bitcoin complementing each other CAN become the future of value storage for investors, a competition is not necessary.