Goldbugs: Bitcoin’s Intrinsic Value Doesn’t Matter
By David - April 14, 2021
Gold investors are training their heads, neck, and eyes to look in different directions anytime Bitcoin is rallying.
It’s almost like they know the potential price gains they could receive with Bitcoin but can’t admit to themselves that Gold finally has a worthy challenger.
It’s understandable — those with a fixed mindset struggle to believe that something so shiny and rare like Gold is significantly priced less than a non-tangible asset like Bitcoin.
Let’s Talk About Intrinsic Value
This is defined as something that has value in and of itself. Yes, Gold does fit the definition and it’s arguable if bitcoin does too, or anything digital for that matter.
Gold investors use this argument to quickly dismiss Bitcoin and here’s why that’s a bad idea…
Michael Saylor, CEO of MicroStrategy once said in a tweet that questioning Bitcoin’s intrinsic value is as dumb as questioning the intrinsic value of New York City.
New York City is one of the top places in the world, is anyone deciding to reside there based on its intrinsic value? No.
Do real estate investors buy properties in NYC based on NYC’s intrinsic value? No.
Sometimes, making decisions based on intrinsic value is pointless.
The response gold bugs would give now is “sO wHeRe DoEs BiTcOiN gEt ItS VaLuE fRoM?”
The answer is instrumental value — Something which is only as good as an instrument to achieve something else. A means to an end.
The fact that millions of people are using it to transact money from continent to continent without any third party is what gives Bitcoin value.
Gold investors seem to forget that humans have intrinsic value too.
So, the majority of people choosing to use Bitcoin in society has more weight than gold’s intrinsic value.
Bitcoin Is Safer To Hold
Yes, gold does protect you from inflation, but there’s nothing that protects gold from theft and confiscation.
If someone knows where you hide your gold, it’s at a greater risk of being stolen. While vault storage seems to be the more secure option, it still presents the risk of being compromised by a third party (or those inside the company).
Gold has been confiscated in the past.
Bitcoin’s digital nature and technology makes itself immune to confiscation.
If someone happens to find out your Bitcoin address, all they can do is stare at gains coming into your wallet. Blockchain technology has made it near impossible for hackers to intrude. As long as you protect your private keys, you’re good.
Also, whether you have 1 Bitcoin or 100 of them, the difficulty in storing and moving them around doesn’t differ.
The confidence in Bitcoin’s security and flexibility gives it more value.
Gold Came First, Does That Make Bitcoin Its Child?
In some perspectives, this may be true as the concept of mining Bitcoin isn’t a spontaneous thought.
Plus, the fact that we call Bitcoin digital Gold does indirectly pay respect to physical Gold.
But, here’s the thing — it doesn’t matter who’s first or second.
The only thing that matters is which one serves society the best today.
The Greek mythology story of Zeus defeating Cronus greatly represents the Gold-Bitcoin scenario:
Cronus (Gold) was the great king who was overthrowing his own children in fear of them surpassing him. Then his child Zeus (Bitcoin) came into the scene, and finally took Cronus’ throne.
What also makes this analogy better is that Cronus is associated with time — almost like how Gold receives its respect for the length of time it has been around for.
Ultimately this analogy points out that just because Gold has been winning for a very long time, it doesn’t mean its reign can’t come to an end.
The World Is Finding Ways To Use Gold Less
Gold’s demand comes from its rarity and consistent use cases of electronics, jewelry, and awards.
But how will Gold’s price react to a world which aims to substitute it with more affordable materials that can do the same (or better) properties?
Product’s having gold is no longer a marketing edge. The majority of people want solutions that cost cheaper, and business owners want better returns.
To hit 2 birds with 1 stone, dropping gold seems to be the logical thing for any company to do.
If people aren’t willing to pay more just because something has gold in it, it’s smarter to follow suit and use another metal such as silver replace it.
Platinum beats gold when it comes to rarity.
There’s a Strong Reason Why Investors Aren’t Dropping Gold
The Dollar To Gold Ratio
The dollar to gold ratio in 1913 was $29.02 per ounce. (source: US Debt Clock)
As of the end of 2020, it’s $34,001 per ounce.
This seems like a great reason to favor gold as the best long-term holdings choice, but consider this:
If gold is planned to be used less in the decades to come, the dollar to gold ratio could be $100,000 per ounce in 2025, yet the price of gold could still remain below $3,000.
Wouldn’t that make Bitcoin the better investment?
Bitcoin has strong momentum behind it, and the world isn’t finding ways to use it less.
Bitcoin is an opportunity for gold holders to reap the rewards they planned for their grandkids.
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