An online forum I read often has crypto-bugs and gold-bugs putting each others’ medium down. I realised that this is a foolish contrast to make.
Crypto is quoted in USD, a currency it is meant to replace.
Crypto is a digital, encrypted password to an online ledger, whereas …
Gold is a heavy, precious metal.
You are not comparing like with like.
| Au | $ | B | ‰ | # | [] | ± | |
| Gold | Cash | Crypto | Stocks | Property | Art | Antiques | |
| Tradeability | 0 | 2 | -1 | -2 | -2 | -1 | -1 |
| Stability | 1 | -1 | -2 | 0 | 2 | 1 | 1 |
| Appreciability | 1 | -1 | 1 | 1 | 2 | 1 | 1 |
| Portability | 0 | 2 | 2 | 0 | -2 | 0 | -1 |
| Ubiquity | 0 | 2 | -1 | -1 | 1 | 1 | 1 |
| Security 1 | 2 | – | -1 | 1 | 2 | 1 | 1 |
| Security 2 | -1 | -2 | 0 | 2 | 2 | 1 | 1 |
| Convertibility | 0 | 2 | -1 | 1 | 1 | 1 | 1 |
| Desirability | 2 | 2 | 0 | 1 | 3 | 1 | 2 |
| SCORE | 5 | 6 | -3 | 3 | 9 | 6 | 6 |
Key:
Tradeability: How easy is it to trade it for another good?
Stability: Does its value hold or fluctuate?
Appreciability: Does its value go up consistently over time?
Portability: How easy is it to flee one’s enemies carrying it?
Ubiquity: How common is it in society?
Security 1: How readily will it be accepted as security on a loan?
Security 2: How easily can it be stolen?
Convertibility: How easily can it be converted into one of the other goods above?
Desirability: How much is it coveted in society?
USD goes down in value over time.
Gold had tended to go up (in USD terms, so hmmmm). I have read that gold has kept pace with inflation since the 1920’s; an interesting and sobering idea: you won’t win big with it over time unless in a (usually short) period of crisis. But you won’t lose your shirt either.
Crypto is still fluctuating wildly if viewed in historical terms, but is generally going up, but is in no way stable; in six months you could be very happy or very sad.
I propose that the proper focus should be:
What are the benefits and deficits of all three?
Benefits:
Crypto is somewhat secret, trans-national, portable and speculative, in the positive sense.
USD is the world’s current, de-facto, tangible international currency; everyone is familiar with it.
Gold is a hedge against financial disaster in your native country. It is also inherently attractive as a thing in itself.
Deficits:
Crypto is a medium that not 1 in 10,000 people truly comprehend.
I bet not 1 in 100 crypto-bugs could tell you, correctly, what a Bitcoin inherently is. I had trouble myself working out what one was, and had to infer it, based on my dalliance with PGP (an encryption protocol) in the springtime of the internet. It’s still a grey area for me.
Try it yourself: research what a BTC inherently is.
USD can be devalued at will by the US Federal reserve, simply by printing more of it. It is controlled by one nation only.
USD stored in a bank is like cryptocurrency: it is intangible and can be frozen, seized or simply deleted, at the will of the banker.
Gold is heavy and has to be sold via eBay, Gumtree or a pawnbroker if you need local currency.
Thus: running down one one other medium of exchange by comparing it to another very different one is a waste of time and energy.
The key criterion is: What will having X do for you? How will it benefit you, now and in the long-term?
And then you place your bet!
Another position to take is to go off-grid as much as possible, store up that which you truly need for the medium-term, be as self-sufficient as possible and not play the game at all.
Not every backwoodsman wearing 10-year-old clothes is a yokel!
Addendum I
I sold my small amount of crypto in late 2021/early 2022 as I began to realise it was crashing. I made a small loss.
I have about £150 worth of Monero in an online exhange I can’t sell because it is considered ‘naughty’ by the Powers That Be; it focuses on being truly cryptic i.e. secret (which could be useful in a time of tyranny and that is also the original idea behind crypto!). I can only withdraw it to a wallet.
I bought about 4 different coins.
My criteria were:
1) That not too much of it should be owned by mysterious parties or the originator himself;
2) That the creator seemed not to be a total geek, or a crook;
3) That it had some popularity, and
4) That the underlying technology was considered good by enthusiasts.
My motive was pure speculation i.e. to gamble.
I’m no expert, but the rules of due-diligence apply to crypto as they apply to investing in FTSE 250 shares or a cow in a field; if you have no idea what you’re buying when you put down your cash, you’re a silly billy.
Addendum II
I only know of one supermarket locally that had a terminal for it, and I think it’s an oddity. And I live in London, UK! I checked the supermarket a few days ago and the terminal is no longer there.
Addendum III
Crypto’s attraction is decentralised finance i.e no need for a bank, you just send tokens directly to someone else’s crypto wallet. This is its original and proper function, not as a speculative asset.
Crypto investing is gambling; you bet which one will rise in value. Most coins are developer scams. Conmen pump and dump them and fat-cats buy huge amounts. The value goes up. Speculators sell before the collapse.
There will likely be more coins failing, then banks with bad debts, then currencies, then nations. War makes an appearance and nations bleed more, still.
USD is heading towards complete digitalisation. Then your government can debit or freeze your account at will. And local fools gladly rush to pay with card-only! So handy!
First there was the Wild West, then the railroads, then great stock swindles, then depression, then government regulation, then decoupling currency from gold and then tyranny. The past repeats itself in the future; the phases are just have different timings.
Addendum IV
Crypto is not a hedge against inflation.
Crypto is not anonymous.
Crypto is correlated with share prices and not commodities.
Crypto has higher initial expenses than shares.
Crypto is very complicated and a mistake can clean you out.
Crypto is a crowded field and a clear winner has yet to emerge.
Crypto technology continues to evolve.
Crypto can be taxed and regulated by governments.