Is Bitcoin a better asset or Gold? This is a question that has been around for a long time, and yet there seem to be no definitive answers. Taking the debate forward, two giant advocates of the respective industries, Anthony Pompliano and Peter Schiff held a debate on YouTube. While they discussed various points, we will have a look at the major ones that are necessary for either of the assets to gain superiority.
Ok, the people have spoken.@PeterSchiff and I are going to go live on YouTube together in a few minutes.
Will post the link when it is set up. Get your popcorn ready.
— Pomp 🌪 (@APompliano) July 27, 2020
1. Demand Curve
It is an established fact that demand for any currency is an important factor for its dominance over others. Take the US Dollars, for instance. It is the most dominant in the world and considered better than any fiat currency; this is because it has the highest demand. The USD is a globally traded currency and is the standard instrument of payment in international trade all over the world.
Therefore, gold and BTC will have to have a stronger demand than the other to hold a dominant position over the other. While it is safe to say that gold has way more demand than BTC at the moment, Anthony Pompliano argued that the demand for Bitcoin is increasing at a much higher pace than gold. According to a report by the Bitcoin Market Journal published in February 2020, there are about 7.1 million active users of Bitcoin around the world. That’s up by 2 million from the estimated 5.1 million users in 2017.
This figure is nowhere close to several hundreds of millions of gold holders in the world. Even theoretically, BTC will have to do much more to dominate gold in terms of demand.
2. Supply Curve
Another important factor is the supply curve. For a currency to have a high value, its supply needs to be scarce so that its monetary value increases over time. In this regard, Pomp said that Bitcoin has a big edge, as only 21 million Bitcoins will ever exist, while there is an infinite supply of gold. He argued that though the human civilization has been using gold for 5,000+ years, it hasn’t been exhausted yet, while on the other hand, about 85-86% of the total Bitcoin has already been mined.
However, Peter Schiff countered the argument stating that gold is a rare metal to find and is finite. He said that the increase in gold supply is up only by 1% per year, which, according to him, will never lead to excess supply. On the contrary, he argued that a Satoshi, the 100,000,000th unit of a Bitcoin, must be compared with ounces of gold.
However, after hearing both the arguments, one can conclude that neither of them has a significant edge over the other. In fact, there is one common question to both, and that’s whether they can guarantee that maximum supply has a limit. If gold miners can mine gold, is it totally impossible to mine more BTC beyond the 21 million mark? Is it absolutely not possible for the majority of BTC holders to advocate for more mining?
3. Volatility in the long run
Volatility is a big issue facing Bitcoin, especially since the downfall from the peak of $20,000 it achieved in December 2017. Pomp argued that the industry experts knew that the sudden rise in the fag end of 2017 was a bubble that would burst since the growth to the peak had been within a span of 18 days. However, it is worth noting that Bitcoin was priced around $3,800 in April last year, and since then it crossed the $10,000 mark on a few occasions, falling sharply each time. Therefore, it can be concluded that Bitcoin has been one of the most volatile assets in the last 2-3 years.
On the other hand, gold has been growing at a very slow pace, though it has been quite stable as compared to Bitcoin and stocks. In the last year, gold has grown steadily, with a couple of hiccups in the latter half of 2019. Apart from that, there hasn’t been any significant movement, though it broke its all-time peak today and is trading at $1,940. But the problem here is that gold has been so stable that the opportunities of investment gains have been nowhere near to what Bitcoin has offered. So, there’s a downside to both sides.
Peter Schiff added that gold is set to cross $2,500 in the next few months, and could reach $5,000 soon after. Pomp disagreed with the $5,000 price prediction for gold, though he himself said that crypto will reach $100,000 by the end of next year. This claim of the $100,000 mark hasn’t appeared for the first time. Other BTC promoters like Max Keiser and John McAfee had made similar claims for 2020. Unfortunately, nothing of that sort has materialized yet.
4. Higher Usability
Another important factor for dominance is usability. The more one can use a commodity, the more it is in demand. Pomp argued that Bitcoin is much more useful than gold as users can make payments directly, without converting BTC to fiat. Schiff countered stating that it is a digital wallet that makes the payment, much like any gold wallet. Pomp said the government accepts Bitcoin for paying taxes, and Schiff said that computers use chips to run their programs, and mining Bitcoin wouldn’t be possible without gold.
One thing, however, they both agreed on was that the US Dollar is going down significantly. Both the debaters stated that the USD will crumble down in the coming years, and the global monetary system will run either on gold or Bitcoin. While Pomp agreed that more people buy and hold gold, things are changing and the increasing usability of BTC will pull people in. Schiff discarded the claim saying that BTC is simply a speculative asset and has no considerable use.
While both of them were debating this, Bobby Lee, a member of the Bitcoin Foundation and CEO of Ballet, tweeted that he wants to see gold cross the $2,000 psychological price point. He further added that he thinks BTC will cross $3,000 and even $5,000 price points.
#Gold has been on a silent rally lately, reaching $1,900, extremely close to the $1,920 ATH from 2011. Once it crosses that, it'll test the all-important $2,000 psychological price point. After, I think it could easily go to $3,000 or even $5,000 / troy ounce.
How about #Bitcoin? https://t.co/LoyQAwvNba
— Bobby Lee – Ballet: Simple & Elegant Wallet (@bobbyclee) July 26, 2020
In short, what we can deduct from the ongoing Bitcoin vs Gold debate is that they both are eyeing global monetary domination, waiting for the USD to fall. Both are well-equipped, with practical use cases. That said, at the given moment, considering all the factors, gold appears to have a slight edge, though Bitcoin is breathing down its neck.