Following the conversations comparing Bitcoin to gold for years now, the World Gold Council has finally weighed in on the argument, delivering a well-written reply.
Advocacy for Bitcoin
The unexpected boom of Bitcoin’s price and market valuation in 2017 caused a lot of tongues to wag, and conjured up praises from unwilling mouths, but its sharp decline did not leave the critics out: they were just as eager to point out the unmatched volatility of bitcoin and the cryptocurrency market, compared to other markets.
However, the market collapse of 2018 as not derailed many from awarding Bitcoin the ultimate savior of value and more secure alternative to Gold. How dare enthusiasts compare the unstable market of bitcoin to gold’s, it could not even beat the New York Stock Exchange in terms of liquidity or even volume. Gold had been existent for a number of years: but that is the argument. The argument is that there is limited security to physical assets. The ever-rising Bitcoin, my friend, could survive a Nuclear war! Straight out of the mouth of crypto pioneer and trailblazer, Nick Szabo.
“The other problem with gold reserves is that they’re physically vulnerable. When the Nazis conquered countries in Europe, the first place they went to was a central bank’s gold reserves.” Preach on.
Nick Szabo is not the only one to have awarded more importance to Bitcoin than to gold, other big shots such as Peter Thiel and former Goldman Sach’s partner Micheal Novogratz has more or less painted the same picture. According to Mike, there was too much hassle in protecting gold stored at gold reserves, too many guns and pieces of machinery and fences and walls that might just be erased at one blast. Have you been to Fort Knox? That was Mike’s trump question: to store gold; you had to spend more money to protect it.
“It costs money to store gold because gold is a store of value. So the idea that it’s supposed to be free and cheap is misguided. That’s what makes Bitcoin unique. It requires security that other cryptos don’t need,” he said.
Bitcoin could survive a nuclear war. Gold? Not so much. Radioactive gold rubbles are not worth that much.
Bitcoin Not a Substitute for Gold Still
Well, despite all campaigns, WGC claims they do not even see Bitcoin as a threat to the gold market. Not when the total bitcoin market valuation is not even up to 1 per cent of Gold. Does Bitcoin trade at $2 billion every day? Well, guess what, gold markets trades are over $250 billion per day, not to mention Bitcoin’s issue with liquidity.
The price of gold has appreciated at 10 per cent annually on average since the late 1970s and kept on that consistency, comparison to Bitcoin on this basis might well just look shortsighted and ignorant. The council respects Bitcoin and the ’remarkable’ progress it has had over the past decade but believes Bitcoin has enough competition with other digital currencies like itself instead:
“[Bitcoin’s] performance has, until recently, been remarkable, but its purpose as an investment seems quite different from gold. Cryptocurrencies have yet to be tested in multiple markets.” the council concluded.