Gold vs. Bitcoin: The Winner Is…
The ultimate competition to become the world’s dominant money will have only one winner.
Anything else would amount to an inefficient barter system, which is why international monetary networks tend to converge on one thing as dominant money at the base layer.
Previously, the dominant base layer money was gold. Today, it’s the US dollar and Treasuries. In the future, I think it will either be Bitcoin or gold.
Over the long term, billions of people through trillions of transactions—in other words, the free market—will ultimately decide whether gold or Bitcoin will win.
I am all for free-market competition in money.
I say let the best money win.
I analyzed the ten most decisive monetary attributes and examined whether gold or Bitcoin has an advantage. The table below summarizes the results.
Bitcoin wins in 6 out of the 10 categories, including hardness (resistance to debasement), which I believe will be the most decisive factor.
While gold has an advantage over Bitcoin in durability, that advantage will only be relevant in the case of an inescapable, global return to the Stone Age that lasts into eternity. Such an unlikely outcome is not relevant to investment decisions today.
Gold also has a fleeting advantage in liquidity, fungibility and privacy, and recognition. However, Bitcoin is eroding those advantages every day.
If current trends continue, I believe Bitcoin will overtake gold in these categories in the years ahead.
Putting it all together, gold’s advantages over Bitcoin are either irrelevant or melting away.
The inescapable conclusion is that Bitcoin has superior fundamental characteristics that make it a better tool for sending value through time and space.
Digital gold is better than analog gold.
In short, Bitcoin is likely to win the ultimate competition and become the world’s dominant money.
Allow me to explain how I see it playing out…
I am not saying it is 100% certain Bitcoin will demonetize gold.
What I am saying is this: over the long term—measured in years, likely decades—there is a good chance Bitcoin will demonetize gold because it has superior monetary properties.
However, the vast majority of humanity does not understand that Bitcoin has the potential to become the world’s dominant money… yet.
What we have here is an enormous information asymmetry.
With Bitcoin, it’s as if you discovered gold before most of the world understood that gold was useful as money.
