Comparing Bitcoin To Gold – Store(s) Of Value?
Mark Cuban claims that Bitcoin is a better store of value than gold. Is he correct?
Let’s start by defining the term store of value…
“A store of value is an asset, commodity, or currency that maintains its value without depreciating.” (source)
Gold has proven itself to be a store of value over several thousand years of recorded history. One ounce of gold today retains similar purchasing power to one ounce of gold one hundred years ago, one thousand years ago, etc.
There is no possibility for Bitcoin to be termed a store of value because it has no history of sufficient length to provide evidence of it being a store of value. Sufficient evidence would require several decades at a minimum; preferably centuries.
IS BITCOIN MONEY?
For Bitcoin to be considered money, it would have to function as a measure of value. For example, “How many Bitcoins will it cost for your new Tesla?”
When a dealer accepts Bitcoin in trade, they are really accepting enough Bitcoin to equal an amount of US dollars agreed upon by both parties. There is a fixed price for your new Tesla, but the car is priced in US dollars, not Bitcoin.
Bitcoin is not money; it is a process for the transfer of money. The money being transferred at each transaction is US dollars, which is the currently accepted medium of exchange.
HOW MUCH IS BITCOIN WORTH?
We don’t know because there is no reliable application of value for bitcoin; but bitcoin does have value.
Bitcoin and other cryptocurrencies offer the potential to avoid a third party, usually your bank or the issuer of your credit card. Hence, transactions using bitcoin or other cryptocurrencies are private.
Avoiding regulatory oversight and potential taxation are positive features of bitcoin and other cryptocurrencies. Unfortunately, regulatory authorities see the very same features as negative, and have already expressed active interest in cryptocurrencies.
Their involvement could lead to possible curtailment of those current benefits. (see Janet Yellen Re: Cryptocurrencies And Terrorists)
VALUES FOR BITCOIN AND GOLD
Bitcoin and other cryptocurrencies offer a process for the private transfer of money. The decentralized tracking system offers freedom from regulatory oversight and potential taxation. These benefits may or may not last much longer.
Gold’s value is in its use as money – real money. That value is constant and unchanging.
(also see Does Bitcoin Have Value; Is It Money? )
Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!