Bitcoin vs Gold vs Altcoins

Bitcoin maxis and gold bugs are having lots of passionate debates on the Bitcoin vs gold topic. Each camp adamantly thinks their asset is going to be ‘victorious’ over the other during and after the monetary reset. However, there are a lot of people in between the two camps that have faith in both assets doing well in the long run.

When the Debate Reached it’s High Point

As a result of all the fervour Daniela Cambone from Stansberry Research organised a showdown bitcoin vs gold debate which is on YouTube between the titans Frank Giustra and Michael Saylor. Frank Giustra is a well respected gold financier while Michael Saylor is the CEO of MicroStrategy and Bitcoin advocate.

This debate covered a lot of ground on the various aspect surrounding the debate including:

• Asset comparisons
• Risk factors
• Historical performance
• Supply dynamics
• Ownership structure
• Market forces

During the debate Saylor mentioned the bitcoin vs gold debate is really about an asset war. Framing the debate in this way provides clarity as to why it is so heated. Bitcoin is like the new kid on the block trying to prove itself and attempting to take the baton as a monetary asset away from gold.

The Crux of the Bitcoin vs Gold Debate

History of Gold

Gold has been a monetary metal for over 5000 years. Nothing has maintained its value as well as gold as a monetary metal over that time frame. Consequently gold kept its value relatively stable within a range to the value of other assets, services or items.

This is so much so that even hords of Roman gold like for example the Hoxne hoard discovered in 1992 in Britain has maintained its value even though it was buried during Roman times.

Gold’s history is what partially makes it so appealing, it gives the asset credibility. There are other aspects to what make gold great as a monetary metal like the fact it:

• Can function as a medium of exchange
• Unit of account
• Portable
• Durable
• Divisible
• Fungible (one ounce of gold is equal to another ounce of gold)
• Store of value

The problem with gold

Gold’s main problem is that it is being manipulated. Central banks own gold and do not want to take it out completely, but they have consistently rigged the price mostly to the downside.

This is because governments are in cahoots with central banks and have incentive to extend and pretend and say there is nothing wrong with economies, especially the western ones. Gold is a measure of a countries fiscal health; higher gold prices are a strong indicator that something is wrong.

As a result some banks such as JP Morgan who have been caught manipulating the price of gold have received record fines. Banks continue to manipulate gold because the cost of manipulation is less than what they make from the manipulation. In other words the fines are simply the cost of doing business.

How things could change for gold

The Bank of International Settlements (BIS) also referred to as the bank of central banks is going to be implementing some new rules called the Net Stable Funding Requirement. The BIS could postpone implementing the new rules, however they should come into effect at the end of June for Europe, Switzerland and the US and by the end of the year for the UK.

The UK has the largest derivates trading desk at the London Bullion Market Association (LBMA). As a result of the new rules the LBMA will be put out of business and gold manipulation will come to an end.

The justification of Bitcoin

Only some visionary individuals predicted Bitcoin’s stellar rise since it was first launched in 2009. Advocates are quick to say it has all the features of a hard money like gold, but has some added benefits. Most importantly for crypo ideologues is the separation of money from the state.

We can see why this is important especially considering the manipulation in the gold market. Governments have no control over Bitcoin. They can be friendly or unfriendly to Bitcoin miners to mine in their countries. Additionally they can allow or disallow trade in Bitcoin. They can ban it, but it will be futile.

All of this has no serious long term effects on Bitcoin. As Hester Peirce the SEC commissioner has said banning Bitcoin is like shutting down the internet and will be foolish to try.

Bitcoin as Money

Additionally Bitcoin seems to be slowly going through the stages of being adopted as money. There are 4 stages of an asset moving to becoming money:

1. It starts as a collectable
2. Moves into a store of value
3. Becomes a medium of exchange
4. A unit of account

At the moment Bitcoin is still at the store of value stage. Bitcoin has outperformed all other assets with Paul Tudor Jones who manages one of the largest hedge funds in the world famously said Bitcoin is the ‘fastest horse’. Large institutional investors like Paul Tudor Jones are slowly starting to jump on the bandwagon and buy Bitcoin because it is acting as a store of value.

Moreover it looks like Bitcoin is going to transition to become a medium of exchange. President Nayib Bukele announced that he plans to pass legislation for El Salvador to become the first country to adopt Bitcoin.

This may seem insignificant since El Salvador is only a small country. However Bitcoin will never be adopted by large countries first. It will start at the fringes and then slowly make the rounds being slowly adopted country by country until larger countries decide to hop on the bandwagon.

Which Asset Will be the Winner?

The reality is no one holds a crystal ball into the future, so there is no certainty, only probabilities. So far Bitcoin has outperformed gold by a long shot over the last 10 years and things continue to look promising for Bitcoin.

$1 invested in Bitcoin vs Gold over 11.7 years

Updated chart can be found at Woobull Charts

With these kinds of gains sentiment will continuing to change in favour of Bitcoin. However what could happen is that sentiment will swing between Bitcoin and gold alternatively depending on what is happening in the market in general and in the assets themselves.

Bitcoin is definitely more volatile and will have greater ups and downs than gold. However when the gold market will outmanoeuvre the price manipulation or not be manipulated anymore, gold will have its time in the sun much like Bitcoin. The question is – by how much will gold rise?

Other considerations in the debate

If the populations lose faith in their own currency because of an ongoing currency crisis and crack up boom then they could potentially adopt Bitcoin. Ruchir Sharma Morgan Stanley’s chief global strategist and head of emerging markets who manages $20 billion in assets certainly thinks so. Sharma warned governments in an article he wrote in the Financial Times saying:

Do not assume that your traditional currencies are the only store of value, or mediums of exchange, that people will trust – Ruchir Sharma chief global strategist and head of emerging markets

In other words the populations could come to the conclusion that governments have control of gold whereas they do not have control over Bitcoin. Additionally Bitcoin has been the better performing asset. If things continue to pan out this way people will gravitate most towards the asset that will better preserve their wealth.

As Max Keiser has said and judging from what is happening so far it could be the case that everything is in hyperinflationary collapse against Bitcoin. However, will Bitcoin be the cryptocurrency that will maintain its dominance over the long term?

Bitcoin vs Altcoins

If we had a take a look at the Bitcoin dominance chart, we can see Bitcoin dominance is trending downwards.

Sourced from TradingView

Altcoins are gradually taking up more of a percentage chunk in the crypto space. The future only holds two outcomes:

Firstly there a lot of altcoins that were hyped up for no good reason and will ultimately fail. Bitcoin will continue to outperform all the altcoins and only a hand full of cryptos will be left.

Secondly the better altcoins will continue to rise and outperform even Bitcoin. This could happen because of a number of reasons. Perhaps because other coins are superior for one reason or another like for example concern over Bitcoin being non-fungible.

Bitcoin vs Gold vs Altcoin Conclusion

Whatever happens, this space has provided a good platform to learn and cultivate knowledge on sound money quickly and in a way that people would not have learned otherwise. All we know for certain is that we are going to be in for some interesting times and we look forward to the ride.