Settling the Gold Versus Crypto Debate

Notes From The Field by James Hickman  April 24, 2024

In 1972, while excavating to build a factory on the Black Sea coast of Bulgaria, a backhoe operator noticed gold objects glimmering in the bucket of his machine.

The construction worker had accidentally discovered the Varna Necropolis.

Dating back to around 4500 BC, the jewelry found in this ancient burial site is the earliest evidence of the use of gold by humans, and archeologists believe that they were considered a status symbol in ancient burial rituals.

Thousands of years ago, gold was likely collected from the earth’s surface in the form of nuggets or river dust.

It wasn’t until about 3500 BC, on a hilltop located in the modern-day country of Georgia, that a group of people from the prehistoric Kura-Araxes dug the oldest known gold mine.

Known as Sakdrisi-Kachagiani, the gold mine predates Ancient Egypt and even Mesopotamia.

By around 2000 BC, commercial transactions involving gold were being recorded on cuneiform tablets in modern-day Turkey. Materials like tin and textiles were traded for a particular weight of gold, because the first known gold coins weren’t minted until around the 6th Century BC.

King Croesus of Lydia in modern-day Turkey, used these coins to standardize the weight and purity of gold.

After that, gold coins were used directly in commerce for thousands of years, until the United Kingdom formally adopted the gold standard in the early 1800s. This was the first monetary system where a country’s paper money had a value directly linked to gold.

And even today, over 50 years since the US abandoned its own gold standard, central banks around the world still hold vast quantities of gold as a reserve to store value.

Individuals and large financial institutions do the same. And gold jewelry is still extremely valuable.

That’s quite a track record. For over 6,000 years, humans have valued gold.

Fifteen years ago, Bitcoin was created. And today there are countless millions of people who believe crypto has value too.

Now, gold and crypto are completely different and seldom belong in the same sentence. But for some reason there are often heated debates between proponents of each who argue bitterly over whether Gold or crypto is better.

No other asset classes attract such conflict or controversy. You don’t see passionate oil investors engaging in riotous debates with natural gas speculators. There is no heated argument over wheat vs. soybeans.

But gold and crypto are sometimes positioned as diametrically opposed, and this is just silly. Each asset has its function.

Gold has an enormous amount of value— and I have actually argued that it is still undervalued, even at its all-time high.

I’ve written extensively about the US government’s financial woes; the national debt is closing in on $35 trillion, and that figure is set to grow by $20+ trillion over the next decade according to the government’s own financial forecasts.

In addition to the new debt, the amount of debt the US government has to refinance over the next 5-7 years is staggering— literally tens of trillions of dollars. And all of it will be refinanced at a higher interest rate.

This means that interest payments on the national debt will keep growing like a malignant tumor.

In fact this year the amount of interest paid on the national debt will exceed defense spending for the first time in US history. And it will only keep rising.

Gold will most likely do very well in that scenario. But more importantly, foreign governments will likely move away from the US dollar as the global reserve currency over the next 5-10 years… and gold is the most likely asset to replace the dollar.

Central banks are already buying more gold as a reserve. And when the dollar loses its dominant global reserve status, countries are likely to turn to gold as a stable alternative that they can trust… because they already own it.

Simultaneously, crypto also has a lot of benefits. If you hold 100% of your savings in the financial system— whether at a bank, brokerage, etc., you might be surprised to find how easily it is to lose access to your funds.

Government agencies can seize your account (without due process) even by mistake. Banks can fail. They can freeze your account and force you to prove that you’re not doing anything wrong.

Plus even the most mundane bank transfers these days are heavily scrutinized. I had an exasperating conversation with a bank not long ago when I tried to send money to my sister… and they required all sorts of paperwork and justification to send my own money to my family.

Crypto is a great way to bypass that mess… to simply send money from point A to point B directly, without any middleman whatsoever.

Crypto exists digitally, so it can be moved across borders easily and at no cost. And if you know what you’re doing, you can hold it yourself, without any third party or even special security equipment… and this is an incredibly unique feature.

The idea behind a Plan B is to figure out what you want to accomplish and figure out which tools are available to help you achieve your goals.

Well, it’s a pretty smart goal to want to have protection against the declining currency of the world’s most heavily indebted nation. It’s also a reasonable goal to want to own some assets that are completely beyond the financial system.

Crypto and gold are two completely separate tools for completely separate purposes. There’s no sense in debating crypto vs. gold. To me the answer is both.

To your freedom,  James Hickman  Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/settling-the-gold-versus-crypto-debate-150734/