The debate over gold vs Bitcoin rages on. We’ve talked about this before, maybe it’s time for an update.

As you probably know Bitcoin fell off the cliff back in November (2018) and spent the first quarter of 2019 in the toilet. Recently it’s made a comeback and is now trading around 8000 USD. Needless to say, this has really perked up the alt-coin space, with lots of new faces and voices talking about how “this is the time” to jump into Bitcoin/Litecoin/etc/whatever.

Which brings us to the present.  Any time an asset class stages a recovery, the bulls and bears both come out of their lairs.  And they are both full of reasons and logic supporting their side of the discussion.  This is what makes markets, after all – some want to buy, some want to sell.  There’s always somebody on each side of a transaction.

Apparently, there’s a company out there named Grayscale Investments that’s all about Bitcoin, and they recently started a marketing campaign called hashtag-DropGold. In case it’s not obvious the campaign is all about promoting the bullish view of Bitcoin at the expense of gold.  After all, if you’re a newcomer you have to get your market share from the old lions in the market, and in the case of Bitcoin that’s always meant needing to justify themselves relative to gold.  You can read the #DropGold FAQ here.

Sure enough, in a response as predictable as the sun rising in the east, a gold company has written a white paper in response, outlining the positives for gold vs Bitcoin. Goldmoney Inc’s CEO addresses “statements and representations” made by #DropGold in a whitepaper presenting the gold side, available here.

Reading these two actually reveals some points The Gold Enthusiast hasn’t seen before, so there are still things to learn about both sides.  For example, we had not considered the physical weight of Bitcoin, beyond thinking about how many barrels of oil it takes to generate a new Bitcoin. Or how many computers you need to do that, etc.

In fact, one of the downsides of Bitcoin is the ever-increasing costs going into the future.  Bitcoin advocates say this is one thing that gives Bitcoin its value.  Detractors say it’s just a huge waste of energy, which can pollute the planet much more than using other forms of wealth storage (such as gold, y’ think?).

Your Gold Enthusiast will confess to still being on the side of gold as a store of capital for bad times.  There are three primary reasons for this. Reason Number 1: Gov’ts can cut off access to alt-coins by shutting off access to specific Internet addresses.  This isn’t hard to do; some countries have large firewalls filtering all traffic right now. It ain’t worth nothin’ if you can’t get to it.

Reason Number 2: The ever-increasing amount of energy required to solve early-generation blockchains is a non-starter right from the go, to anyone who’s ever been on a real project for more than a few years.  Most human minds are not good at long-term perspectives, getting even simple known things like compound interest wrong in their life’s planning. So anything that requires increasing levels of work or expense as time goes on will inevitably be abandoned for easier solutions. The alt-coin world is trying to address this with new algorithms etc, but there is still a long way to go to match the convenience of a stack of coins under old socks in the closet.

And finally, Reason Number 3: It’s incredibly inconvenient for regular monetary uses.  Inconvenience either comes in the form of the person you’re buying from not taking it, or the expense of the transaction.  Either way the result is it’s very difficult to justify for everyday use, especially small purchases like a carton of milk.  Yes, Bitcoins are fractional, meaning you can split them up into smaller pieces.  But the cost of splitting an existing block and generating the new block on the blockchain is more than already-existing forms of money, like credit cards.  Or cash…

What do you think?  Will alt-coins eventually solve their problems and finally go mainstream?  Or will they forever be on the fringes of the financial world?  Sound off in the Comments below.

Please give a thought to all our men and women in uniform this weekend.  They deserve all the support we can give them.

Signed,

The Gold Enthusiast

DISCLAIMER: The author has small long-gold holdings in NUGT, JNUG and a few junior miners.  He does not own any Bitcoin as of this writing, but he does own very small amounts of Ripple and Ethereum. He is not expecting to trade any of these in the next 48 hours.


About the Author: Mike Hammer


For 30-plus years, Mike Hammer has been an ardent follower, and often-times trader, of gold and silver. With his own money, he began trading in ‘86 and has seen the market at its highest highs and lowest lows, which includes the Black Monday Crash in ‘87, the Crash of ‘08, and the Flash Crash of 2010. Throughout all of this, he’s been on the great side of winning, and sometimes, the hard side of losing. For the past eight years, he’s mentored others about the fine art of trading stocks and ETFs at the Adam Mesh Trading Group More...