Gold Versus Bitcoin: The Pro-Gold Argument Takes Shape

Tyler Durden's picture

Authored by John Rubino via,

Sound money advocates who love the concept of cryptocurrencies but don’t want to abandon precious metals have been trying to clarify their thoughts of late.

Risk Hedge just helped, with a comprehensive statement of the pro-gold position.

The following is an excerpt. Read the full article here.

All the Reasons Cryptocurrencies Will Never Replace Gold as Your Financial Hedge

Despite what the crypto-evangelists will tell you, digital tokens will never and can never replace gold as your financial hedge.


Here are six reasons why.


#1: Cryptocurrencies Are More Similar to a Fiat Money System Than You Think.
The definition of “fiat money” is a currency that is legal tender but not backed by a physical commodity.


It’s clear that cryptocurrencies partially fit the definition of fiat money. They may not be legal tender yet, but they’re also not backed by any sort of physical commodity. And while total supply is artificially constrained, that constraint is just… well, artificial.


You can’t compare that to the physical constraint on gold’s supply.


Some countries are also exploring the idea of introducing government-backed cryptocurrencies, which would take them one step closer toward fiat-currency status.


As Russia, India, and Estonia are considering their own digital money, Dubai has already taken it one step further. In September, the kingdom announced that it has signed a deal to launch its own blockchain-based currency known as emCash.


So ask yourself, how can you effectively hedge against a fiat money system with another type of fiat money?


#2: Gold Has Always Had and Will Always Have an Accessible Liquid Market.
An asset is only valuable if other people are willing to trade it in return for goods, services, or other assets.


Gold is one of the most liquid assets in existence. You can convert it into cash on the spot, and its value is not bound by national borders. Gold is gold—anywhere you travel in the world, you can exchange gold for whatever the local currency is.


The same cannot be said about cryptocurrencies. While they’re being accepted in more and more places, broad, mainstream acceptance is still a long way off.


What makes gold so liquid is the immense size of its market. The larger the market for an asset, the more liquid it is. According to the World Gold Council, the total value of all gold ever mined is about $7.8 trillion.


By comparison, the total size of the cryptocurrency market stands at about $161 billion as of this writing—and that market cap is split among 1,170 different cryptocurrencies.


That’s a long shot from becoming as liquid and widely accepted as gold.


#3: The Majority of Cryptocurrencies Will Be Wiped Out.
Many Wall Street veterans compare the current rise of cryptocurrencies to the Internet in the early 1990s.


Most stocks that had risen in the first wave of the Internet craze were wiped out after the burst of the dot-com bubble in 2000. The crash, in turn, gave rise to more sustainable Internet companies like Google and Amazon, which thrive to this day.


The same will probably happen with cryptocurrencies. Most of them will get wiped out in the first serious correction. Only a few will become the standard, and nobody knows which ones at this point.


And if major countries like the US jump in and create their own digital currency, they will likely make competing “private” currencies illegal. This is no different from how privately issued banknotes are illegal (although they were legal during the Free Banking Era of 1837–1863).


So while it’s likely that cryptocurrencies will still be around years from now, the question is, which ones? There is no need for such guesswork when it comes to gold.


#4: Lack of Security Undermines Cryptocurrencies’ Effectiveness.
Security is a major drawback facing the cryptocurrency community. It seems that every other month, there is some news of a major hack involving a Bitcoin exchange.


In the past few months, the relatively new cryptocurrency Ether has been a target for hackers. The combined total amount stolen has almost reached $82 million.


Bitcoin, of course, has been the largest target. Based on current prices, just one robbery that took place in 2011 resulted in the hackers taking hold of over $3.7 billion worth of bitcoin—a staggering figure. With security issues surrounding cryptocurrencies still not fully rectified, their capability as an effective hedge is compromised.


When was the last time you heard of a gold depository being robbed? Not to mention the fact that most depositories have full insurance coverage.

The gold vs bitcoin debate has a long way to run. But if the outcome is a world in which money is what the market - rather than the government - says it is, then hopefully there will be room for both.

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Raffie's picture

Gold is so liquid that is going down the drain.

1260-1290 is whjere they love the prioce to be.

Plunge Protection's picture

Except I can't bet my gold in online casinos or send it around the globe in seconds.

YUNOSELL's picture

Wait until the next crisis and see how easy it is to sell gold. That's when gold shows it's liquidity.

BaBaBouy's picture

I've always said ... Bitcoinz should back itself with at least 1 Ozs GOLD Per ...

It would then become a tangible asset.

Skateboarder's picture

ReggieMiddlecoin is the best coin. Backed by the full faith of internet tittypics.

p.s. it's hilarious how Bitcoin's physical image in the world is shown as a gold coin. It should be all black and green text like the Matrix, doogies.

Pandelis's picture

where can you spend the gold? will you put a coin in the bus? (the famous martin armstrong argument)


Bitcoin is the currency of little people mining in their computers 24/367 in china

IH8OBAMA's picture

Just ask yourself, would you take a job where you are paid in X amount of Bitcoins?  No matter where the value of Bitcoin goes (up or down in relation to the Dollar) you would still recieve the same number of Bitcoins per month.  And, you agree to not quit for at least 5 years.

Still think Bitcoin is stable and valuable?  I didn't think so.


Mustafa Kemal's picture

Do you know what a false dichotomy is?

Yes, I would not sell my house and buy bitcoin.  But I would put a few K into it on an asymmetric bet.

That bet last year has turned into some serious "value" .

As for stable, no, its not, but unless something dramatic changes it appear to be 

Unstable and UP! So, its lack of stablity is of little concern to me.

east of eden's picture

Well, let's put it this way. Bitcoin has been around and in the mainstream for what, 5 or 6 years? If you had purchased 50.00 of bitcoin when it was first introduced (and I know this is a stretch, but anyhow), you would now have 14.4 Million dollars. If you had of bought 50.00 worth of gold 6 years ago you would now have 40 dollars in gold.

Still think gold is stable? I didn't think so.

Gap Admirer's picture

Beanie Babies also did INCREDIBLY well for people who bought early.

Justin Case's picture

I am adamant that bitcoin is in a bubble that will blow up violently. The handwriting is on the wall, there is no value to bitcoin. The only reason why people are buying bitcoin is that it’s already gone up so much, and this is the mark of a bubble just like tulip bulbs, Florida real estate, and dot com stocks in 1999. Pure speculation right now.

IH8OBAMA's picture

Hindsight is 20-20.  We're talking about the future.  All we really know is that crypto has been volatile, hasn't been tested by time and has an intrinsic value of zero.

And, yes, gold is much more stable than cryptos.   I think everyone can agree on that.

techpriest's picture

Esp. when you look at the 100 year, 500 year, etc. histories.

My stances is still what it was last year: if a customer asks me to put BTC payment into their e-commerce site, I will put it in. If you want to pay me the dollar equivalent of BTC, I will take it. I'm not putting any other skin in the game.

If you bet on it and won, congratulations. If not, there are plenty of other ways to make money.

Bubble Man's picture

"Well, let's put it this way. Bitcoin has been around and in the mainstream for what, 5 or 6 years? If you had purchased 50.00 of bitcoin when it was first introduced (and I know this is a stretch, but anyhow), you would now have 14.4 Million dollars. If you had of bought 50.00 worth of gold 6 years ago you would now have 40 dollars in gold."


I say if you were smart enough to invest in bitcoin, great for you.  The cryptos have been the best investment in 2017, and congrads for your forward thinking.  I ,unlike many,  do not hate on others for their good fortune.  You took a risk and were rewarded.

That said I think there is a huge disconnect between financial asset and money.  Gold is money.  It's purpose isn't as a digital, financial investment.  If you bought an ounce or 1/10 ounce of gold, it will still be an ounce or 1/10 of an ounce of gold 20 years from now.  And it will be worth more in 20 years from now then the dollars value 20 years from now with little risk.  

Everything is financialized in 2017.  Stock, bonds, insurance, cryptos, etc, etc.  I think cryptos have a chance of becoming the means we conduct commerce 5 years from now.  But the whole point of gold and silver is to hold some wealth outside of the financial markets. And comparing gold & silver dollar price on 11/20/17 to stocks, bonds, crypto & fiat currency completely misses the whole point of why some of us own them. My 2 cents.

QueeroHedge's picture

Bitcoin vs gold?

Why not bitcoin & gold?


Give it up to IH8OBAMA and the rest of the zh btc haters, when your PM holdings were put at risk from new competition you did nothing but cry tulips for 4 or 5 years. I guess you guys are more zerohedge than me, I hedged my PM holdings.

Bubble Man's picture

"Why not bitcoin & gold?"

That's not a bad startegy. I have looked into bitcoin for the last couple of years.  Ultimately, it isn't easy enough for a layman like me to understand how you purchase, use, store in clear enough non-tech English to feel comfortable owning.  YET.  Especially the idea of storing bitcoin online or offline?  In your online wallet or offline wallet?  Why some exchanges only let you sell x number of $100's of dollars this day, etc.  Now this may change.  But I am the average non tech savy Joe.  And I'm not alone.

Regardless, my point to the author was I do not think comparing physical gold's price to bitcoin's price is relevent.  Both maybe hedges against government fiat currency devaluation.  But one (physical gold) isn't in the digitized financial system.  Bitcoin is.  That is NOT saying bitcoin isnt a good hedge against the usa $$ or may become the currency of the future.  

ChumbaWumba's picture

Here's a step by step guide to taking your bitcoin/ETH offline and stickin on a USB drive:

There's also a built in backup (via the SD-Card) in case it gets lost or damaged.

QueeroHedge's picture

>>Ultimately, it isn't easy enough for a layman like me to understand how you purchase, use, store in clear enough non-tech English to feel comfortable owning.


Paper wallets my friend, incredibly quick and easy to setup so that hacking is not possible. Your only issue is storing the private key safely. Not easy I admit, but worth it. Go through the hassle now to put 10-20% in crypto and you will be very happy you did in 5 years time. I was saying this 5 years ago too fwiw.

JustUsChickensHere's picture

Storing a private key safely .... not too hard if you know about PGP - the only encryption that Snowden has faith in - because it has been secure since 1991, despite the best efforts of the deep state.


So how?  Make PGP easy for yourself - use Thunderbird as (one of) the email client. Add the Enigmail add-ond - a friendly GUI that makes PGP easy.

SAVE your pgp keyring by sending a backup to one or more email addresses you have - the key ring is already encrypted without any further work when you set things up.  This backup is how you recover from the worst case failure - where .gov has seized all you computer tools and possesions. (multiple email addresses at multiple provides in multiple countries)

Now - send yourself PGP encrypted email(s)with the public/private key pair for each Bitcoin address of that 'paper' wallet.

Leave the Subject of these emails blank - the Subject is never encrypted and that is an infomation leak.


The recovery process is not really hard.

So (for example with three email addresses) you then have the keys stored safely in encrypted email - three copies in different countries, and even if you have everything confisfacted in your home jurisdiction, you just need to borrow a computer, install Thunderbird/Enigma. Download a copy of your PGP key ring from one of the three email backups. Read your email with the Bitcoin private keys .. use as normal.


Where are the risk points with this?   Memory ... that is the problem.

You must always know the passwords to get access to each email. The easy way to ensure this, is do not allow you normal computer to 'save the password' of each email address. Force yourself to always type the password in. Repetition means that fairly soon you will be truly unable to forget these passwords.

The same applies to the PGP pass phrase - you always type it, and so will never forget it.



Skateboarder's picture

There is something about the physical realm that will never translate into the virtual realm. A gold miner will not go mine gold for you after some head faggot of monetary control somewhere decided it was worth only 50 bucks an ounce. I.E., the minimum value of an ounce of gold is what it takes to mine, refine, coin, distribute, and get it in your hands. There is no such minimum for Bitcoin or any other crypto. What are you going to make that minimum based on? One computation unit, or some bullshit? It doesn't work.

The act of computation as the analogy for physical resource extraction is about the stupidest fvcking thing I've heard of.

Pandelis's picture

take it up with Mr. Rothchild, i have no dog in this fight.

IH8OBAMA's picture

Well, get yourself a dog and join in!

Tao 4 the Show's picture

Finally, somebody said it. Exactamundo.

I can appreciate some of the thinking behind cryptos, but the "mining" thing is idiocy squared. Wasting computers and electric power to do absolutely nothing is remarkably stupid to the point of suggesting mass hypnotism. Surely someone can do better.

buttmusk's picture

tao - the whole digital "mining" thing adds to the mystique and the illusion of value being created.

strannick's picture

Bosses wife just loaded up on Bitcoin last week. Just in time for futures trading/smashes

jaxville's picture

  That is a ridiculous argument.  You can't even get on the bus with a $50 bill if you expect change. 

   What can you buy in your community for bitcoin, besides fancy overpriced coffee?  Sure, I know you buy amost anything with bitcoin but it is through online vendors.

Antifaschistische's picture

I always hated to break it to the gold ain't going away.  ever.   I like gold....but a "golden" currency is NOT in our future.

I hate to break it to the bitcoin collectors...cryptos are just another fiat.  different.  sure.  advantages.  yes.  disadvantages.  yes.

crypto's should be compared to all other fiats.   not to gold.  not to oil.  not to rhodium.

QueeroHedge's picture

I'm sorry but can you name me one similarity between crypto and fiat? They seem extremely opposite.

Endgame Napoleon's picture

Or, it should be a universal, visual symbol with some kind of math connotation, bringing to mind those endorsements by Thiel and Wozniak, explaining how Bitcoin and other cryptos are backed by math. Math serves the function of a physical backing.

Bubble Man's picture

"p.s. it's hilarious how Bitcoin's physical image in the world is shown as a gold coin. It should be all black and green text like the Matrix, doogies."

I've noticed that too.  Why have a bitcoin look like a gold coin (old us gold dollar). I think this is the main reason TPTB will never ban cash.  So the people have a perception that their digital currency (0,1's) represents money $$$.  Granted that $100 bill may have the purchasing power of $10 bill but it won't be banned for illusion's sake.

That said, I'm one of the few holdovers that uses physical cash.  I think if they can make an app where the younger generation can use their smartphone to pay for gas, groeries using cryptos it really isnt that much difference from the illusion your debt card has those 0,1's that represent $$$'s most never see to pay for their gas & groceries.

Golden Phoenix's picture

The advantage of a blockchain is its distributed ledger requires zero trust. 'Backing' blockchain with gold requires you to believe the guy who told you the gold is still there or ever was. All you do in repeating is point out your total lack of understanding.

Winston Churchill's picture

A ledger is merely the representation of the accounting of some actual wealth.

Its absolutely not wealth in itself.Everytime time you say ledger you kneecap your own case.

My quickbooks is for sale, not the underlying biz,for you only $10m.

Its an illogical fallacy,added to which TPTB owns ALL the infrastructure your crypto's

rely upon to run,from your computers bios on up.

Gaius Frakkin' Baltar's picture

Wealth is what people make it.

Gold is just a goddamned piece of metal.

It has its limitations like any other money.

east of eden's picture

Where your argument fails, is that everything, other than productive land, water, food and shelter is exchanged on a faith basis. Gold is nice. I love the look of it, the feel of it. There is indeed something very special about it, however, to say that gold or silver in and of themselves will get you anywhere in a crisis is over emphasing their utility. If the system 'crashes', no one is going to sell their land or their house to you for gold, I can guarantee it. At least not in the short term, and in a crisis, it's always the short term you have to worry about.

Winston Churchill's picture

I can assure you from personal experience bribing my way out of a couple of very dodgy situations,

that you're talking crap.I would still be rotting in some 3rd world prison,if I had survived.

Gold will be your best friend in exactly the worst of the worst situations.

Speculate all you want,but I KNOW whats real money at the end of the day.You guys don't know the

difference between credit and money, or an accounting system and actual capital.

I'm more concerned with TPTB plans for that accounting system.

Gaius Frakkin' Baltar's picture

Bitcoin peddles hope for the future (a new better tomorrow).

Gold peddles fear of the future (collapse).

That's the main difference.

Secret Weapon's picture

Thought provoking on a number of levels.

SeuMadruga's picture

The move to strip off a currency of any backing's already been made almost half a century ago. Cryptos ain't original at all on that matter, and surely don't get any better by presenting such "feature".

jaxville's picture

  Good point.  Too many of the arguments for bitcoin are basically accusations of being ignorant or a Luddite if you don't buy into it.

  I may not be the sharpest tool in the shed but I know a scam when I see one.

nope-1004's picture

Bigcoin-to-gold ratio for years of market recognition, store of wealth, and history is 1:1,000.

That there even is a debate should be most troubling for the invested tulip crowd.


techpriest's picture

We can all take a breath and look at the market caps. BTC appears very valuable because there are less than the maximum permitted 18 million. If a billion people get into it, adding another $1,000 to BTC, for example, would take $18 billion, or $18 per person. Even a factory worker in China can swing that a few times a year. If it is just 100 million people, we're taking $180 per person, which is something most Americans could come up with out of their monthly pay.

Kinda like the 401ks keeping the markets up because millions are putting in their matched 6% every month. As long as there is a devoted core putting in a chunk of their paycheck every month, BTC will keep rising. But I do agree that this is a function of popularity, as opposed to fundamental value. If the popularity shifts, the price could swing just as violently in the other direction.

east of eden's picture

Well, in the last 'crisis' gold lost half it's value, in days, as traders sold their gold to cover their losing positions. I"m not saying the same thing won't happen with crypto, however, considering (1) momentum, (2) liquidity, (3) ease of moving money across borders and all the rest, I still say that Cryptos have gold beaten, and the price tells the tale.

Try taking a kilo of gold across an international border. You will be stopped, probably arrested, likely have your gold confiscated and end up spending thousands in legal fees to get you out of some third world hell hole jail.

Besides, unless and until the Fed, the Comex and the LBMA cease manipulating the price of precious metals, and allow the market to decide the price, you are basically buying into a guaranteed losing proposition.

crazybob369's picture

"Try taking a kilo of gold across an international border. You will be stopped, probably arrested, likely have your gold confiscated and end up spending thousands in legal fees to get you out of some third world hell hole jail."

Maybe, if you try it with a solid kilo bar. Not so hard with a few necklaces/bracelets/watches with a few gold coins in you pocket mixed in with your loose change. Most gold coins still say legal tender.

NEOSERF's picture

Which is exactly the reason most governments will get in, monitor, count, tax and generatlly restrict something that undermines borders and national security

Justin Case's picture

Wait until the next crisis

Maybe keep an eye on Euro zone banks where they want to eliminate depositor's insurance. Some may move funds to real money and store it in a safe place, out of reach of banks and Gov't.

AlphaSeraph's picture

When I read about that proposal my thought immediately went to bank runs and that 1988 "The Economist" cover with the Phoenix sitting on a pile of burning cash with the headline "Global currency 2018".

Tick tock, we're getting close.

east of eden's picture

Yeah, it 'shows' it's liquidity by dropping like a stone. Don't you remember? In the first 8 months of the financial crisis gold lost 50%. Sure, the next year it did great, making roughly 200% but ever since then it has been all downhill. It's all a matter of timing imo.

AlphaSeraph's picture

I'm deeply suspicious that this next crisis will start with a 1 or 2 day market sell off/panic but it will be halted, the exchanges will be closed and the banks will go on "holiday". Markets will be completely closed off, selling (or buying) impossible, cash from the banks either impossible or enormously limited and when the "holiday" is over, 2-4 weeks later, the price of gold will be 8, 10, 12k who will be up 50% measured in current fiat and then hyperinflation will kick off. The banks will close AGAIN, this time for longer and the new IMF based global currency will be deployed, ya know..."to save us all".

east of eden's picture

YEs, that will probably happen. And so, you have some gold. Who is going to take your gold for 'goods'? THere will be a deficit of fiat in the system. Paper money will disappear faster than a turd in a rainstorm.

And those who might accept your gold or silver, if they even believe your are giving them 'the real thing', won't be able to make change.

So you have a quarter ounce - do you want to have to spend it on lunch?

silverer's picture

MasterCard. Everywhere you want to be.