Gold Fund: Bitcoin Will Make Gold "Global Money" Again

The manager of Old Mutual Gold & Silver Fund, a precious metals fund with over $220 mln under control has said Bitcoin is “paving the way” for a global gold comeback.

Speaking to Bloomberg in an interview published today, Ned Naylor-Leyland said that the marriage of Bitcoin and gold was essentially a logical one given the characteristics and remit of both.

“Bitcoin was explicitly designed to be digital gold,” he said.

 

“So if you’re going to have a small proportion of a fund in Bitcoin, it should be in a gold fund because that’s exactly the point.”

As CoinTelegraph's William Suberg notes, the fund, which began in April this year, is aiming to allocate up to five percent to cryptocurrency, creaming off profits from price upticks to reinvest back into gold and silver.

image courtesy of CoinTelegraph

Naylor-Leyland is highly bullish on the concept going forward, echoing CME Group’s Chairman Emeritus Leo Melamed in his desire to bring discipline to the scene for investors.

“It’s about bringing the ownership of disciplined money into the modern world,” he continued.

 

“Bitcoin is paving the way for the reintroduction of gold as global money.”

As we previously discussed, the real importance of bitcoin is not making cheap, easy payments. It’s not a way of making fast payments. It’s not going to allow for microtransactions or all these other use cases that we’ve heard are important for bitcoin.

The most important thing that bitcoin offers is a new form of sound money outside the control of any authority or government in the world. And that is something very, very important for the world economy. Bitcoin is hard money as opposed to easy money.

Easy money refers to money whose quantity is easy to increase, in case there is an increase in demand for it. So if people move toward using copper as money, it is very easy for copper miners to increase the supply and bring the price back down, which will hurt the people who used copper as the store of value for their savings. So copper is bad as a store of value, because it’s easy to produce in response to an increase in demand.

Gold, on the other hand, is hard money because even if the price of gold goes up a lot, it is very hard for gold miners to increase the supply of gold in the world. It is hard to bring the value down. Therefore, gold serves as a good store of value in the long run. It’s a much better store of value than other forms of money over time.

Bitcoin is far closer to gold. It is a digital equivalent of gold.

Bitcoin’s supply is strictly limited. There will only ever be 21 million bitcoins. And the code that controls the issuing of the bitcoins is decentralized among thousands, tens of thousands of nodes that operate the bitcoin software. And if it were to change, it would need the majority agreement of everybody involved.

Since everybody involved has an interest in maintaining the monetary policy in a way that maintains the value of the money, it is highly unlikely that we’re going to witness any change in the monetary policy. Even technical changes, like changing the block size or various parameters, have been almost impossible to make in bitcoin.

It’s possible to make a copy of bitcoin, but it’s not possible to change bitcoin. There will always be some people that want to stick to the inflation schedule as it is. So the monetary policy of bitcoin is immutable, it isn’t going to change, and since the supply is strictly limited and the network is distributed and nobody can control it, we might just have the digital equivalent of gold.

This, I think, is an enormously important innovation, because it has many good properties that gold doesn’t have. It’s very easy to send across the world very quickly, and it’s much harder to confiscate than gold. Therefore, the possibilities are exciting for people who believe in the importance of sound money for society.

Look at the era of the classical gold standard, from 1871, the end of the Franco–Prussian War, until the beginning of World War I. There’s a reason why this is known as the Golden Era, the Gilded Age, and La Belle Epoque. It was a time of unrivaled human flourishing all over the world. Economic growth was everywhere. Technology was being spread all over the world. Peace and prosperity were increasing everywhere around the world. Technological innovations were advancing.

I think this is no coincidence. What the gold standard allowed people to do is to have a store of value that would maintain its value in the future. And that gave people a low time preference, that gave people the incentive to think of the long term, and that made people want to invest in things that would pay off over the long term.

With bitcoin, once you’ve started holding some bitcoin and you see it appreciate, you start understanding that there is a very high opportunity cost to spending, and you start thinking twice about spending frivolously.

Also, bitcoin matters for moving very large quantities and high amounts of value, particularly in transactions in which you’re trying to avoid censorship or economic inflation from the central bank. So as a store of value, this is what bitcoin’s importance is.

*  *  *

Not everyone in the wider gold industry is as happy with the status quo, however.

Discussing a drop in profits, BullionVault Research Director Adrian Ash said earlier this month that Bitcoin “noise” was “distracting” some investors and leading to gold being sidelined.

As John Rubino previously noted, 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.

Comments

MonetaryApostate DownWithYogaPants Thu, 11/23/2017 - 20:17 Permalink

I understand TMosley because I understand his people & their plans, which are all written down.What many serfs don't get is, you will only be able to buy, sell, & trade online soon, after you pay your $50/GB bill, & they won't be accepting cash or gold, nope.The monetary system will be enforced by starvation, anyone who resist will get dealt with swiftly...  Digital Totalitarianism globally.Hyperinflation is coming!Wake up...https://plus.google.com/+GaleInnes/posts/CdLuBK4GcMy

In reply to by DownWithYogaPants

Escrava Isaura blargg Fri, 11/24/2017 - 04:35 Permalink

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tmosley: Adapt or die. Metal doesn't adapt. Exactly. And Bitcoin is even less adaptable, because Bitcoin is an algorithm. Post financial collapse (2022/2027) you want to be 33% physical gold. 33% silver. And 34% cash. All these need to be small properties, meaning in the case of cash, bills no larger than $20 dollars. Do not have $100 dollars piece of gold. Post energy collapse (2027/2032) the only energy available will be burning the trees.    

In reply to by blargg

FreeNewEnergy Escrava Isaura Fri, 11/24/2017 - 06:51 Permalink

Obviously, you ate too much merde yesterday, because you are still full of it.Gold doesn't need to adapt. It already has all the properties it needs, scarcity, divisibility, global acceptance.Gold was used to purchase a goat or ox back in Roman days. It was good for trade for spices and fabrics during the middle ages. Gold coins were currency in most countries up until the era of central banks, especially after 1913.China is currently developing exchange of oil for gold, so it is re-emerging and will always be of value.Being practical and poor, I hold mostly silver and feel confident that once gold emerges from the clutches of the cnetral bank era (ending soon, 2-10 years, depending on where you live), silver will follow. Always has.Once the mechanisms (digital) for free trade in gold and silver are mre widely available, the world will change. The biggest casualties will be fiat money (inflation) and bitcoin (price deflation).I hope that's clear enough for your tiny, dimpled mind.

In reply to by Escrava Isaura

QueeroHedge tmosley Thu, 11/23/2017 - 23:27 Permalink

Hard to believe your tales of profit when you were saying you are allin on BCH hours before it halved in value. Then when I ask you if you were able to limit losses you told me you profited from the carnage? Trading cryptos is a swingy business, you tell us often about your good days but you never seem to have a bad day. People make of that what they will. As a long term investor there is nothing more insufferable to me than a crypto speculator thinking they are hot shit because they somehow managed to make speculative profits on a currency that has risen a thousandfold in just a few years. Your argument that BCH is a better payments system than BTC ergo better crypto is a little off too. I put it down to you being green on the crypto scene, more of a speculator seeking a quick score than long term investor/believer. BCH and BTC both fall way short in payment abilities than many other cryptos already, even Visa heh. BTC is clearly not headed towards becoming a premiere payment system, it has bigger intentions mainly becoming a digital store of value or digigold.  And why must we choose one or the other, whether that is crypto vs PMs or BTC vs BCH, why not both?

In reply to by tmosley

MANvsMACHINE tmosley Thu, 11/23/2017 - 19:54 Permalink

tmos,

I'm a crypto fan and support much of what you have said here on ZH but I am a goldbug (and silverbug) as wel.

Assuming you bank big coin on cryptos, as I plan on doing, are you not considering moving some of those gains into physical metals?

Also, which side of the Bitcoin argument are you on?

BTC or BCH?

In reply to by tmosley

FreeNewEnergy tmosley Fri, 11/24/2017 - 06:58 Permalink

I just wanted to respond to tmosley to join the growing number of posters who think he's a total asshat.Your problem, tmos, is that you measure your "wealth" in fiat or crypto. Wrong on both counts. Physical matters, be it gold, silver, real estate, structures, seeds, vehicles, machinery or any of a million other hard goods.What do rich people usually do with all their cash? BUY STUFF. Houses, cars, yatchs, etc.Physical, baby, it's what's for wealth.You're so misguided.

In reply to by tmosley

medium giraffe tmosley Thu, 11/23/2017 - 22:03 Permalink

If you're convinced of your position, why do you constantly argue your case and hurl insults at anyone who opposes your view?

Why can you be relied upon to appear in any article about cryptos and tap out emotionally charged responses?

Why expend so much mental energy on a group of anonymous nobodies you despise?

Surely if you know your own mind and have a rock solid conviction you don't need to seek validation.

Your responses seems obsessive and impulsive in the extreme, even for someone talking up their book. You always have to have the last word on every comment aimed at you.

I enjoy some of your comments on other articles, but this crypto shit has you wound as tight as a drum.

If you were getting paid to do this, it would make sense, but.... jfc man, do yourself a favour.

In reply to by tmosley

tmosley medium giraffe Thu, 11/23/2017 - 22:43 Permalink

>why do you constantly argue your caseBecause I am honest.>and hurl insults at anyone who opposes your view?I only insult those who insult me.>Why can you be relied upon to appear in any article about cryptos and tap out emotionally charged responses?Because I have passion and conviction.>Why expend so much mental energy on a group of anonymous nobodies you despise?The people who respond to me while in a state of cognitive dissonance (peanutz/oldbugs) are not my intended audience. They are more like bugs on my windsheild.>Surely if you know your own mind and have a rock solid conviction you don't need to seek validationI don't need validation. Just the opposite, actually. I need arguments (VALID arguments) against my position. The longer I do this without someone producing such, the more confident I can be in my thesis.>You always have to have the last word on every comment aimed at you.Do you prefer teachers who remain silent, or teachers who respond?>but this crypto shit has you wound as tight as a drum.Projection, tbh.>If you were getting paid to do this, it would make sense, but.... jfc man, do yourself a favour.I pay myself. You could afford to pay yourself if you had listened to me, btw. 

In reply to by medium giraffe

Scuba Steve tmosley Thu, 11/23/2017 - 23:12 Permalink

I'm agnostic to bitcoin and cryptos in general because I believe the harder they go forward the more real PM's becomein peoples minds vs dollar demise ... and certainly credit/equity investments house of cards come down. That being said, Question for tmosely, serious:Do you believe U.S. Central Bank and/or Global Central Banks hold bitcoin/cryptos to any extent?

In reply to by tmosley

Raffie Scuba Steve Fri, 11/24/2017 - 00:52 Permalink

'the harder they go forward the more real PM's become in peoples'2009 when Bitcoin 1st came out, gold was $1087, today its still between $1260 and $1300 and Bitcoin is over $8k... I think as fiats crash and burn people will either buy PM or Cryptos. Some will be PM if it is available, but they are leaning more towards cryptos because of portability and global adoption. While Pm is nice, if you in a county that is collapsing it might be hard to hide PM from the hoards of people looting and plundering other peoples PM so cryptos are more liked in that way.Banks have Ripple (this is the banker crypto), while you can make money off of it, there is great risk. The banks hold about %60 of ripple coins and when times get tough they will sell their share and crash the price hard for a quick flood of cash.Holding both cryptos and PM is best. Even if you buy cryptos, make profit then pull initial investment out and let the profit work for you is great and you reduced your chances of loss if u feel the need to.

In reply to by Scuba Steve

kochevnik Raffie Fri, 11/24/2017 - 05:35 Permalink

PM is limited by maths of platonic shapes explaining atomic electron shells.  In contrast almost unlimited distributions of noncolliding hash functions available for crypto.  So crypto subject to branding.  Fortunately for crypto, humans are deevolving and displaying hardened branding preferences.  Over time preference for Pepsi, Coke and Bitcoin may be infused at molecular genetic level.  Until then social proof and mass domestication conformity pressures will favor dominant market player bitcoin until technological obsolescence

In reply to by Raffie

FreeNewEnergy Raffie Fri, 11/24/2017 - 07:05 Permalink

Raffie... nigga, please.This comment:

I think as fiats crash and burn people will either buy PM or Cryptos. Some will be PM if it is available, but they are leaning more towards cryptos because of portability and global adoption. While Pm is nice, if you in a county that is collapsing it might be hard to hide PM from the hoards of people looting and plundering other peoples PM so cryptos are more liked in that way.

...has zero credibility, because if someone from these so-called "hordes" puts a gun to your head and tells you to open your crypto wallet and transfer it to his or into cash, what are you gonna do? Say no? Boom, head gets blown off. Try faking him/her out with phony data? Boom, head gets blown off.You will give up your secret key/code to defend your life or that of your family, same as with any other valuable.Stop feeding BS and start thinking rationally.

In reply to by Raffie

UrbanMiner tmosley Fri, 11/24/2017 - 00:10 Permalink

@tmosleyNot sure why it need be a choice between the two. I own both, I've invested heavily into digital and metal. I feel very good with that position. Many of these ICO's will burn and crash, and governments worldwide will print into a death spiral, gold and silver will have their day in the sun. That you can bank on. It is better to be diversified rather than smug in the notion that the crypto space won't hit the rocks at certain points. The real outlier is the coming boom in silver tech, it makes me giddy even thinking about it.The world is real and tangible, metals like lithium and silver have an important place in any investment portfolio because of their real world applications.Cheers

In reply to by tmosley

malek tmosley Fri, 11/24/2017 - 01:48 Permalink

>Because I am honest.

That depends on what the meaning of the word "is" is.
As you always only tell half of the story (at best) to me you're deceitful, not honest.

For example if you'd openly state you only want to ride the upside but have no (clear) conviction on tulipcoins in the longer run (2+ years), that would be honest.

In reply to by tmosley

Spaced Out MANvsMACHINE Fri, 11/24/2017 - 04:01 Permalink

He doesn't bank big coin on cryptos, he recently let slip that he uses shapeshift, an exchange which only allows very, very small transactions.He was also advising people to leave their money on exchanges last week....which proves he's a muppet with no understanding of crypto whatsoever:https://wolfstreet.com/2017/11/21/tether-cryptocurrency-hacked-list-of-…

In reply to by MANvsMACHINE