Bitcoin is Not a Replacement for Gold’s Near $8 Trillion Market Cap, Says World Gold Council


It is well-known that blockchain is a very destructive technology, and crypto, by its very nature, is set up to compete with and possibly overtake fiat currency at some point in the future and this was made obvious when a viral campaign called #dropgold hit the internet, which was backed up by Grayscale Investment.

The campaign was self-explanatory and implied that investors should focus their efforts on cryptocurrency rather than gold in order to thrive. This campaign has seen intense pushback from many in the financial industry, one of which was Adam Perlaky who, on May 2, 2019, spoke out against the campaign stating that cryptocurrencies are not a replacement for gold. Perlaky is a manager of investment research at the World Gold Council.

The campaign in question had gone viral after it launched a TV ad which told investors that they are in a digital world and they should not allow their portfolios to be weighed down by gold and instead to diversify into bitcoin, which is the future. The argument that was put forward is that cryptocurrencies are superior to gold because they are borderless in their use and are more secure and have utility, unlike gold. Michael Sonnenschein, who is the managing director of the Grayscale stated that,

“Barry Silbert, CEO of the fund's parent company DCG, had the idea for the campaign, hoping to target the older generation in particular,”

adding that,

“We're going after a narrative around gold being where investors should go when markets turn south or as a hedge against inflation…We're highlighting the absurdity of gold.”

Hitting Back

As part of the push back against the campaign, uploaded a post that explained why cryptocurrencies are not a suitable replacement for gold and that although they look promising, they should not be taken seriously as a substitute whether in theory or practice.

Some of the reasons given for this is that gold is less volatile and that while cryptocurrency might be interesting and new, its constant volatility makes it unsuitable as a medium of exchange and discourages strategic investment

“Gold’s volatility is slightly above the stock market as a whole, in line with most fiat currencies over time,”

the post said.

It was also mentioned that gold has more liquidity and trades $150 billion a day which is nearly 100 times that of bitcoin with the pricing being more consistent across exchanges. It is also armed with an established regulatory framework and it was pointed out that a lack of regulation allowed incidents of fraudulent activity among crypto exchanges and has lost billions of dollars in the process whereas gold trades in an authorized and regulated market.

It is also said to have a better investment portfolio as it has been a source of returns for the stock market for a very long time and serves as protection against inflation.

The demand of gold was touched on as diverse coming from jewelry and central banks, whereas the demand of cryptocurrency is mostly speculative for the time being and investment-related with there is little evidence to back up its use as a medium of exchange. Gold also has a track record dating to 600 BC t whereas bitcoin is only a 10-year old technology. The post also mentions that there is nothing stopping a better cryptocurrency from coming into the market and devaluing those already in existence but that such an event is unlikely to happen in the case of gold.

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