Since Bitcoin (BTC) was birthed, an array of narratives have swirled around its mythology. While many say it is a replacement for PayPal, Visa, and similar incumbents, many have come to the conclusion that it is a digital store of value, or, as put by some, a digital gold.
Some have gone as far as to say that Bitcoin is easily better than gold in many departments, hence the “Drop Gold, Buy Bitcoin” advertisement campaign launched by an industry fund last week. However, some haven’t taken this narrative lightly.
“Cryptocurrencies Are No Replacement For Gold”
For those who missed the memo, Grayscale, an investment services subsidiary of the New York-based Digital Currency Group, launched an extensive ad campaign that touted Bitcoin as “gold 2.0.” On Wednesday, the company released a 45-second advertisement that depicted two youngers physically “dropping gold” as those around them struggle with the heavy, cumbersome commodity, escaping to what is assumed to a society predicated on the use of digital assets.
Bitcoin or other cryptocurrencies weren’t depicted in the video, but the point was made clear, BTC and potentially other cryptocurrencies may act as a proper alternative to the precious metal, which has held a hegemony as the go-to store of value for millennia. As Grayscale writes on its webpage accompanying the campaign and remarks in the video, “drop/bye gold, buy Bitcoin.”
Although many took this advertisement sitting down, some have taken up arms against the narrative being pushed. Legendary commodities trader and crypto chartist Peter Brandt, for instance, quipped that the “Bitcoin versus gold” dialogue is “nonsensical and asinine,” noting that the two assets have inherently different narratives and valuation models, despite what some see as overlapping characteristics.
This Bitcoin vs Gold dialogue is nonsensical & asinine. Both assets have different narratives and independent drivers for valuation. https://t.co/3D1CuXRQ5Q
— Peter Brandt (@PeterLBrandt) May 1, 2019
Some have simply stated that cryptocurrencies are not a viable replacement for gold. In a recent blog post published by the World Gold Council in the wake of Grayscale’s commercial, researcher Adam Perlaky noted that gold’s market is less volatile and more liquid. Indeed, volatility levels and order book spreads in Bitcoin markets are dramatically higher than that of gold. But as a number of industry thinkers have pointed out, such volatility and liquidity will likely be only temporary, as any nascent asset class or newfangled investment opportunity is inherently subject to the shortcomings of undeveloped markets.
Perlaky didn’t stop there though. He adds that unlike gold, Bitcoin remains unregulated and non-tantalizing, touching on the fact that the cryptocurrency exists in a regulatory grey zone and that most common consumers aren’t actively seeking out BTC allocations. And as so-called “gold bug” Peter Schiff, the chief executive of Euro Pacific Capital, adds, “you can’t mine Bitcoin without using gold,” touching on the metal’s unique viability in electronics and modern innovations.
The ultimate irony in the #DropGold campaign, is that you can't mine Bitcoin without using #gold. This is just one of the many utilities of gold that Bitcoin promoters deny exist. But while they overlook gold's obvious utility, they ascribe utility to Bitcoin where none exists!
— Peter Schiff (@PeterSchiff) May 3, 2019
Does The Bitcoin > Gold Argument Have Merit?
However, some are adamant that it is only a matter of time before Bitcoin surmounts gold.
In a recent research paper, Grayscale (obviously a tad bias) does note that Bitcoin, in many respects, is drastically better than its physical counterpart. BTC is mathematically scarce, capped at 21 million units; BTC is decentralized and verifiable through the Internet; BTC is portable and divisible through the UTXO blockchain system, and is unconfiscatable. Gold, on the other hand, has an effectively unlimited supply, risks around its centralization (earlier this year, over $1 billion worth of Venezuelan gold was locked), an inability to be easily divided and transported across borders, and concerns around its purity.
The benefits that Bitcoin provides over gold have led some, like Gemini’s Tyler Winklevoss, to quip that the only thing that gold has over BTC is a “3,000-year headstart.” But whether or not the cryptocurrency will be able to catch up remains to be seen.