People who know me from working in the gold and silver bullion space for 14 years may not fully understand why I don't talk about gold anymore and instead talk about Bitcoin. To all my former colleagues in the gold space, as well as the many people who I am humbled to have sought my viewpoints on gold, economics, and geopolitics over the years, I’d like to explain why.
One friendly word of advice from my own errors: Don't get stuck in “sunk cost bias,” because it could cost you years.
Performance
Let's get the elephant in the room handled from the start, and then I will clarify my rationale for Bitcoin as a better alternative for returning mankind to honest money.
When I started in the industry, performance gains (in USD terms) of an investment in gold would be +271% if sold today. If held in Bitcoin, gains over the exact same time period would be +58,574,750%. Yes, you read that right - it's not a typo. When calculating this, I actually did it several times just to make sure my mind wasn't playing tricks on me.
When Bitcoin passed $1000 per Bitcoin, that was an interesting inflection point. It ticked off a huge wave of interest that culminated in a hype cycle price of over $19,000 per Bitcoin. When Bitcoin rocketed past 10x the price of gold per ounce, it seemed that no one even blinked. It was almost like it had become expected in the back of people's minds.
Game Changer
It was not until 2020 when I started a deep dive into what makes Bitcoin tick that I realized several things which shifted me on a deeply philosophical level. Until this time and for many reasons, I assumed that the only path back to an honest monetary system was gold. However, there are several reasons why my assumption has changed.
This Bitcoin thing is not going away; there is no way to stop it.
Bitcoin is the first money of its kind in human history in three important ways:
◦ It requires no one else's permission to transact it.
◦ Its supply is permanently limited. This is the first time we have a form of money that does not respond to demands for more of it in terms of its supply growth.
◦ It has at its core a mechanism that is immune to human attempts to subvert its rules and change it into something that is not good for mankind as all other forms of fiat money have done.
I admit that these are bold claims deserving a deep explanation which I will write more about in the future. In the interim, there are volumes of available books, articles, and data explaining the basis for this viewpoint if you care to look.
Properties of Gold
Gold's most important feature lies in physics: gold cannot be destroyed. Everything else can including computers, exchanges, mining pools, wallets, power grids, the internet, nations - you name it. If planet earth blew up, the gold atoms would still be there.
Gold exists as atomic number 79 on the periodic table. It is chemically inert and does not interact with oxygen. It is also the only element with properties that make it completely immune to the forces of entropy. The only way to destroy it would be to fire it into the sun or somehow put it in the middle of an equivalent fusion reaction that took the atoms apart at a subatomic level.
This is where gold’s true utility comes into play. Not only does gold store value, it’s the way gold stores value. Gold stores energy in a form that is indestructible. Unlike anything else you can invest or store money in, gold doesn’t rely on any external force for this to continue to be true over time. It is sort of like a battery with no expiration date.
A Critically Important Question: Will The Internet Continue To Exist?
The argument that gold serves as better money than Bitcoin overlooks a basic requirement of conducting business in today's world.
Technology has a way of continuing. It also has a way of adding layers of innovation on top of what we already know. We have anthropological proof that certain societies have completely ceased to exist, and in some cases their knowledge passed away with them. However, assuming we continue as a society, it must also be assumed that the internet will continue with us as well.
The idea that gold could be a better money would require that some existential crisis such as a full-scale nuclear war destroyed the internet or governments shut it down. Another possibility is that we suffer a non-sustainable energy crisis that precludes us from continuing the use of the internet. While it would be wise to not rule out those crises as possibilities, it is probably safe to place the probability of them occurring low enough to not be the main driver of our reasoning.
That leaves us with the internet continuing to exist. If the internet remains with us, then so will Bitcoin. In order to “kill off Bitcoin,” the world would have to agree to shut off the internet, somehow locate the tens of thousands of copies of the Bitcoin blockchain spread out all over the world and in orbit on satellites, shut them all down simultaneously, and then ensure they were never started back up again.
If Bitcoin continues to exist, it then becomes clear that it is a better alternative as money in our interconnected world because of its portability, its limitations on supply, and its ability to transact instantly at a global scale and near zero cost without requiring the permission of another human being.
The Gatekeepers Are The Bottleneck Preventing The Level Up Of Mankind
In 2020 during the beginning phases of the policy response to the perceived virus pandemic, flights were grounded for several weeks from entering or leaving Switzerland. Gold held in Swiss vaults could not go anywhere, and it was unclear how long that would last.
It was during this time that I learned an incredibly valuable lesson regarding gold: If you can't move gold from one place to another without the assistance and/or permission of other human beings, then gold is incapable of fulfilling its purpose as a medium of final settlement.
This was a huge light-bulb moment for me. I realized that this was the same problem every single medium of exchange (aka money) has faced for the entirety of humankind’s existence. If another person is involved at any step of the settlement process, the various shortcomings of humans - be it theft, incompetence, wickedness or whatever other ailments humans have - could be the reason your transaction fails.
We have always considered “failures to deliver” in the industry, and while our business never experienced a failure to deliver, the glaring reality of the whole thing hit me. It's never really in your control, and if you think otherwise, you are deluding yourself.
If you are settling gold in any way that requires its movement on a large scale and assuming it isn't just sitting in the same vault and switching legal custodians, these are all the humans you will need permission and cooperation from in order to move your gold safely from one place to another:
Your custodian - The legal counter party in your gold’s purchase, storage or sale.
Vault operators - The people who operate the vaults where your gold is secured.
In transit security - The people operating the secure logistics vehicles.
Flight crews – The people operating the planes.
Customs Agents – The people involved if you are moving gold into or out of a customs bonded facility or across borders of a country.
In transit security (again) – The people moving your gold to its new vaulting location.
Knuckleheads – The people who figured out your gold was being moved and wanted to take a crack at liberating it from your ownership.
In short, for gold to settle as final payment, it must shift into the possession of a new owner. For this to occur, it needs to be able to move safely from one place to another. In a nutshell, this is gold's greatest and dare I say fatal weakness if your intention is to settle any substantial amount of it in anything that resembles current-day commerce.
Bitcoin Is The Future Of Freedom For Humanity
Why? Because:
◦ It cannot be taken from you. If you hold your keys in cold storage, nothing short of torture will allow anyone to take it from you without your consent. If you use multi-sig and other best practices, then even torture will not work.
◦ It can transit the earth at the speed of light at near zero cost.
◦ It requires no one else's permission.
◦ Its supply is strictly limited so that you will not suffer the devastating effects of inflation.
In the current framework where business is ever more conducted on a global versus national scale, the ability to transact globally at the speed of light without gatekeepers is critical to all commerce.
Governments are becoming extremely intrusive into individual finance, and the ability to transact without another person’s permission is perhaps the most important feature of any money we might use. If you require a government's permission to transact, that is fine so long as governments continue to operate in the best interests of the people, but history shows that we cannot always rely upon such benevolence.
If we consider the fact that the limited supply of Bitcoin prevents the abuses of the money printer we are all witnessing on an almost daily basis now, it becomes clear that Bitcoin is superior in every aspect except indestructibility. So long as the internet exists, then this single feature does not make gold a better form of money.
Bitcoin is the pathway to human freedom and out of the present and inevitable devaluation of our current forms of money. If you are like I was, you may find that difficult to accept, so I will leave you with this thought: If what I have stated in this document is true, can you afford to put off doing the work of researching Bitcoin? If you are a fiduciary, I would suggest that it is your duty to do so. I have always taken stewardship very seriously, and I trust that you do as well.
Beautiful piece. I had this same epiphany in 2017, and it’s the reason why I own no gold anymore and I don’t intend on reversing my decision any time soon or ever.