The campaign could confuse investors who are not familiar with the crypto world. Bitcoin competes against traditional fiduciary currencies and payment systems
The recent campaign of the Bitcoin investment firm Grayscale against gold has triggered an important debate on whether the pioneer cryptocurrency, or any other, is really a competitor for the precious metal.
Of course, the answer is negative, especially not in the terms in which Grayscale seeks to make gold appear obsolete through a promotional video of the campaign entitled “Discard gold”.
The mistake in Grayscale’s proposal is not in overemphasizing the possibilities of Bitcoin, but in that it is a potentially confusing element for those who are not familiar with the crypto ecosystem, since they could consider the attempt at confrontation made to be a mockery. It is like comparing apples and oranges.
First of all, the firm promotes the weight of gold as an advantage for Bitcoin over the former. They have even asserted that “in a digital world, gold should not put weight in your portfolio”. But those who invest in gold do not go down the street with a bag full of ingots, which Grayscale presents in its video.
Regardless the amount of creative license that the campaign uses in that respect, it is still very inaccurate. Promoting the adoption through false messages and unrealistic expectations could only lead people to move away from cryptocurrencies.
The most frequent reaction to the campaign has been one of rejection, and even one of mockery. It is obvious that Bitcoin does not even intend to compete with gold. The competition posed by cryptocurrencies is against the fiat currency, which has been clearly stated until now.
Apples and Oranges
A cryptocurrency, whose registration is done digitally, is not the same as a natural resource such as gold, which has also been used for a long time, not only for its commercial exchange or as a store of value, but also as an issue for technical development.
Bitcoin actually competes against traditional currencies because, essentially, its natural purpose is to become a manner of payment, such as fiduciary currencies, although probably with better levels of security and auditability. The value of both is based on trust and use, which is a consequence of the first element.
On the other hand, gold has a value that if receives from its quality of being a material not only used for decoration, as in the case of jewelry, but also in technological industries, for medical instruments, and even in the aerospace industry. This does not make the precious metal better or worse than Bitcoin, since they are simply two different things.
They are also different from Grayscale’s proposed approach: this is, as an investment. First, their markets are essentially different. A very clear feature to establish that difference is volatility.
In the last three years, gold had its lowest price at US $1,126.95 per ounce, whilst the highest price was US $1,366.25. In fact, on May 9th, 2016, the price was US $1,265.25, and on Friday May 10th, 2019 it was US $1,287.10, according to gold.org.
In the same period, BTC went from US $460 to more than US $6,300, according to LiveCoinWatch figures. However, that is not all about it. During these three years, although it has not returned to the levels of May 2016, it reached very close to US $20,000 and had several ups and downs, until it underwent a bearish trend that led it to be just above US $3,300 last December.
To conclude, investors need to approach both assets in very different ways, since attempting to compare them is basically a waste of time.
By Willmen Blanco
