Bitcoin or Gold? Market Giants Debate Which Asset Is Superior

Source: Exame
Original Title: Bitcoin or Gold? Market Giants Debate Which Asset Is Better
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Is Bitcoin a good substitute for gold? This question became the central topic of a debate this Thursday (4th), featuring two well-known figures in the cryptocurrency market: Changpeng Zhao, former CEO and founder of a leading exchange, and Peter Schiff, an entrepreneur and financial analyst famous for his criticism of cryptocurrencies.

The two entrepreneurs held this discussion during a leading exchange’s Blockchain Week in Dubai. Despite their differing views, they agreed on one point: the US dollar and other fiat currencies will gradually depreciate, pushing people to seek stores of value.

The Gold Perspective

Schiff argued that while he agrees “something doesn’t have to be tangible to have value,” he emphasized, “the reason Bitcoin has no value to me is not because I can’t touch it—I recognize intangible assets can have value—but because it has no other use besides transferring it to someone else.”

“If I transfer tokenized gold to you, I’m transferring ownership of something with specific characteristics and market demand. Only gold can do certain things, and because it’s scarce, it has high value. That’s supply and demand. If I transfer Bitcoin, I’m transferring nothing,” he contended.

He further pointed out, “One function of gold is as a monetary reserve for central banks, which helps determine its price. Since gold does not deteriorate and doesn’t lose value over time, when I own gold, I also own the rights to what others might do with it in the next 10,000 years, because it won’t disappear or change. You don’t get that with other commodities.”

“Bitcoin is not used as money today. Just because people want to buy, don’t want to sell, or want to speculate on it, that doesn’t mean it has value. To me, people own Bitcoin for speculation,” Schiff added.

Schiff claimed, “There are dozens of tokens that can do the same thing as Bitcoin. It has no unique features.” He also argued that the difficulty this cryptocurrency has in gaining real-world utility would ultimately reduce its potential value.

The analyst also noted that in the past four years, Bitcoin’s value versus gold has dropped, rather than risen as it has versus the dollar. He believes this move shows that cryptocurrencies are still not a substitute for investors’ traditional stores of value.

“In the past four years, we’ve seen unprecedented money, hype, announcements, speculation, and yet over the same period, Bitcoin’s value relative to gold has dropped, not risen. If Bitcoin couldn’t rise through all of this, why would it keep appreciating?” he questioned.

The Bitcoin Perspective

The leading exchange’s founder said Bitcoin would be an “improved version” of gold. For Changpeng Zhao, this cryptocurrency has a number of specific features that make it valuable and provide a better alternative for investors seeking a store of value.

“The internet has nothing physical. Everything is virtual, but things have great value— the internet is valuable. Bitcoin itself does not exist; there is no physical or virtual Bitcoin, what exists is data in the blockchain network. When we say we’re sending Bitcoin, nothing is transferred—it’s just a transaction record. By analyzing the entire transaction history, we calculate how much everyone has,” he explained.

Zhao commented, “It doesn’t lack value just because it’s virtual. Twitter is valuable, Google is valuable. The value of a project is not tied to its physical attributes. Even with gold, the value of gold used in industry is lower than the value of gold used for investment.”

“As for gold, if someone finds a large new mine or a way to chemically synthesize gold, it could undergo a major change in supply and demand. We know exactly how many Bitcoins there will be, and exactly where they are. Gold is also no longer used heavily by central banks. Gold’s value doesn’t come from its commercial utility, but from its scarcity, while Bitcoin has great utility because it’s a new technology for money,” he argued.

Zhao also pointed out, “Many people recognize Bitcoin as money,” but said, “the central debate isn’t whether Bitcoin is money, but whether it has value. In fact, part of its value comes from speculation, but part also comes from its utility, from the fact that it’s an asset with different use cases and features.”

“Tokenized gold requires me to trust a third party, whereas Bitcoin does not— I only need to trust the technology. Bitcoin went from zero value in 2010 to over $90,000 today and is still the best use case for blockchain technology,” said the entrepreneur.