Gold proponents bristle at hearing crypto being compared to the precious metal. While their arguments are sound, their contempt for crypto has only begun to fade.
The benefits of crypto
While the casual observer likely views cryptocurrencies as akin to e-cash, the asset class offers investors several tangible benefits.
Foremost among these is anonymity, as crypto transactions are somewhat private. And as crypto is dependent on distributed ledger technology, governments have limited power to interfere in such transactions.
Moreover, cryptocurrencies are highly divisible and subject to scarcity. It’s these last two characteristics that typically foster comparisons to gold.
While seemingly apt, gold proponents have begun to substantially push back against this idea.
Why crypto is not a competitor of gold
Catherine Raw, the North America COO of Canadian-based mining company, Barrick Gold, believes viewing crypto as a competitor to gold is misplaced.
“I do not think cryptocurrencies are a competitor to gold. The very tangible nature of gold is what keeps a special place for it,” she says.
“So it will always have value, whatever the price is, I don’t know, but it will not be zero. Whereas cryptocurrency could be zero—that’s the difference.”
As a precious metal commonly used in jewelry, gold has long been viewed as having an inherent value, even across disparate cultures.
In challenging the comparison, well-known gold bug Peter Schiff is even more explicit:
“Bitcoin is nothing like gold….you have all of this terminology that was deliberately used to make it sound like gold (such as) it’s immutable and it’s scarce and it’s divisible.
“But the reason gold became money in the first place is because everybody wanted gold because of what gold is, because of the tangible, physical properties of that rare element – all of the things that you can do with the metal. It is a luxury good that people have desired for time immemorial.”
In addition to the inherent value argument, gold proponents like to point out that gold is less volatile, operates in a more liquid market, trades in an established regulatory framework, and has a well-understood role in an investment portfolio.
More importantly, they note, gold has long been considered a safe-haven investment.
Is there room for gold and crypto?
While Raw believes that gold is a superior asset, she also asserts that “the phenomenon of cryptocurrency is here to stay.”
Her view stands in stark contrast to other gold proponents, many of whom bristle at the mere mention of cryptocurrencies.
Schiff has even taken to debating the topic:
However, Schiff is known to not be entirely anti-Bitcoin either, as his company, Schiff Gold, accepts bitcoin as a payment method.
In contrast, billionaire Paul Singer, another outspoken gold proponent, has been calling cryptocurrencies a bubble, a scam, and a fraud,
“It is not just a fraud. It is perhaps the outer limit, the ultimate expression, of the ability of humans to seize upon ether and hope to ride it to the stars.”
Nonetheless, gold proponents typically neglect to note that gold traders do not actually take possession of gold.
Instead, all trades are handled electronically (as with cryptocurrencies).
In the end, the either/or view may be partly misplaced as interest in promoting gold-back cryptocurrencies continues to increase.
There are currently at least 20 exchange-traded gold-backed cryptocurrencies on the market and Russia is reportedly considering using its gold-reserves to create its own gold-backed cryptocurrency.