EDITOR NOTE: What you’re about to read are a host of financial experts slogging it out--some pro-gold and some pro-bitcoin arguing points for the better safe-haven asset. It’s interesting to see their takes on bitcoin’s scarcity and convenience versus gold’s scarcity and proven 5,000-year track record. It’s also interesting to see how bitcoin’s scarcity might compare with the other thousand cryptocurrencies in existence (most of which you’ve probably never heard of). Bitcoin has proven itself to be a profitable, if not speculative, “store of value,” at least for now. But it isn’t a successful “medium of exchange.” The world can agree on gold, but not everyone can agree on (nor does everyone hold) bitcoin. If the fiat system were to collapse tomorrow, much of what can be implemented and agreed upon are based on existing reserves common to most countries and citizens around the world. Central banks, countries, and some citizens hold gold. Most don’t hold bitcoin. And although bitcoin might be transacted much faster and more efficiently, garnering consensus and creating the infrastructure to exchange and store bitcoin might be trickier than its worth. We may be biased toward gold. But it’s hard to beat money that’s proven time and again, at least over 5,000 years, that it's “sound.”
As bitcoin continues its meteoric rise, breaching new records and crossing the $1 trillion market capitalization mark in just the last week, more investors are assessing the longstanding comparison between the famous cryptocurrency and an equally well-known asset class: gold.
Both assets, experts say, are often seen as ways to diversify a portfolio or as a hedge against fiat currency inflation brought about by what some observers see as unsustainable fiscal and monetary policies.
Yet, until recently, it was rare to see Wall Street analysts, chief executives, or established investors seriously compare the two assets. Bitcoin, commonly referred to as digital gold, has historically been seen as a risky speculative investment for those looking to profit in the short term. Gold, meanwhile, has always been considered a safe-haven asset.
Now, bitcoin's rapid ascent to over $57,000 per coin, backed by new investments from Tesla and other institutional names, has led some to question whether old assumptions about these assets are correct.
Given digital currencies' dizzying climb, Insider surveyed 10 experts to see if they'd rather hold bitcoin or gold for the next 10 years, and why. We asked bitcoin bulls, gold lovers, analysts, executives, and more.
Here's what they had to say:
- "My vote would be for gold because it has thousands of years of a historical record as a store of value, has one-fifth the volatility of bitcoin, and doesn't face the same competition risk. The day that Queen Elizabeth trades in the five pounds of gold in her crown for crypto is the day I'll shift course." - David Rosenberg of Rosenberg Research, former Chief Economist and Strategist for Merrill Lynch Canada and Merrill Lynch in New York
- "Gold and silver have been stores of value and mediums of exchange for at least 4 millennia in every civilization in every corner of the world. It has unmatched accessibility to people of all economic standing and technological knowledge. And gold is the ultimate currency of central banks, silver of the people. There is room for cryptocurrencies too since their digital nature is a fundamental difference from gold and silver. But that characteristic also ensures that cryptocurrencies will never replace gold and silver and will ultimately improve the metal's value." - Phil Baker, President and CEO, Hecla Mining Company
- "Gold has long been considered to be the safe-haven asset of choice, and, while bitcoin is 'the new kid on the block,' it's debatable that it will eat into gold's market share for a number of reasons. Bitcoin and gold both have significant advantages over fiat currencies because neither can be diluted or debased. There is a possibility that bitcoin could one day cease to exist through hostile legislation. Some bitcoin derivatives have already been banned. Companies such as Facebook who have attempted to start crypto have been prevented from doing so. So, while bitcoin is a more recent form of investment that is certainly receiving a lot of hype, gold has retained its value through centuries. Whether bitcoin will offer the same level of longevity is highly questionable." - Sylvia Carrasco, CEO and founder of the gold exchange platform Goldex.
- "One of the assumptions underlying bitcoin's bull case is its limited supply, but the supply of cryptocurrencies, on the whole, is theoretically unlimited. Some extol bitcoin as a portfolio diversifier, but it has so far exhibited higher correlations to equities than gold, particularly during periods of equity market stress when diversification tends to add the most value. The demand for bitcoin may be over its skis relative to its likelihood to carve out a significant economic or financial use case." - Michael Reynolds, Investment Strategy Officer at Glenmede.
- "Both crypto and gold have passionate investor bases… However, there are very clear differences. Gold's history as a basic building block of global money is 5,000 years old and time-tested; Bitcoin is 10 years old and has existed in only one monetary regime. The standard deviation of bitcoin's price is 75%, making it a horrible store of value. Recent price history shows a large bias toward speculative interest, so much so that companies are tempted to include bitcoin on corporate balance sheets to help grow assets in excess of corporate performance. Crypto is a poor monetary substitute. In the US, filing your taxes requires a voluntary disclosure of your cryptocurrency profits. If a crypto trade automatically generated a statement to the IRS as a brokerage transaction does, the speculative outlook could dim."- Robert Minter, Director of Investment Strategy, Aberdeen Standard Investments
- "Bitcoin is a 100x improvement over gold as a store of value. The world is realizing this and beginning to reprice digital currency in real-time. Although bitcoin has increased hundreds of percent in the last few months, it is likely to continue appreciating in US dollar terms over the coming years. I suspect that bitcoin's market cap will surpass gold's market cap by 2030. For this reason, I own no gold and have a material percent of my net worth invested in bitcoin." - Anthony Pompliano of Pomp Investments and Morgan Creek Digital Assets
- "The crypto bull run has seized the attention of millions of people who previously had never considered digital currencies like Bitcoin to be an alternative asset. While gold and bitcoin are both sometimes used as a means to diversify and hold a range of valuable assets, in many ways they are quite different. Bitcoin and other digital currencies can be easily traded on platforms. We have seen progressive global firms offering to receive payment in bitcoin and advocates such as Tesla taking an active role in promoting it. This liquidity, ease of exchange, and wider use in the modern economy are some of the major differentiators. Gold has a relatively defensive purpose- to hold value, whereas Bitcoin and other currencies are intended to have several uses, not least ease of exchange, purchase, and liquidity." - Pavel Matveev, CEO, Wirex.
- "Based on the trajectory of this digital gold path and use cases globally, we believe bitcoin will be a mainstream asset class in the future. While gold has clear value and safety, the upside in bitcoin is eye-popping if it stays on its current course over the next decade." - Daniel Ives Managing Director and Senior Equity Research Analyst at Wedbush Securities
- "Gold is, no pun intended, the standard if you want to measure purchasing power over millennia. The liquidity of gold has been consistent over time. Gold is what defines the X-axis of purchasing power over time. Bitcoin, while it shares defensive qualities with gold, has the additional attribute of being aspirational. What bitcoin would seem to possess is the potential to go up to multiples of a moonshot. No one thinks gold will moonshot. Bitcoin is also finite, unlike gold. No increase in demand can change that. There is zero elasticity." - JP Thierot, CEO of Uphold, a digital money platform
- "I would probably pick bitcoin but why not both? Gold and bitcoin have a very similar aspect to the portfolio. I would add gold as a diversifier. I would add bitcoin as a diversifier. The hedge is diversification. Bitcoin is a tool to get there. Bitcoin is a hedge to losing money to something stable." - Mike Venuto, co-portfolio manager of the Amplify Transformational Data Sharing ETF, a $1 billion ETF.
Originally posted on Markets Insider