4 Ways Gold Accounts Beat Cryptocurrencies
In his latest podcast, Peter Schiff illustrates the important differences between cryptocurrencies like Bitcoin and a gold transaction account like Goldmoney when it comes to convenience and preserving wealth. Essentially, it comes down to the technological risks and the price volatility of the underlying currencies. Here’s a breakdown of Peter’s major points:
One advantage cryptocurrencies have over physical precious metals is the ease of transaction, but it comes at a cost. Bitcoin is a completely digital currency, so you can spend or transfer it just like cash. However, with a Goldmoney account, gold owners can now enjoy the same convenience, whether they’re depositing, sending or receiving transfers through an app or paying with a Goldmoney MasterCard.
“It’s not about Goldmoney being the substituted for Bitcoin,” Peter explains. “It’s gold itself. Gold is what you want to own, not Bitcoin. Goldmoney makes gold as convenient to use as Bitcoin. In fact, I think more convenient to use when it comes to commerce because you can deposit some of your gold in your Goldmoney account and now it takes all of those liquid characteristics that so many people like about Bitcoin.”
Another of Bitcoin’s favorable characteristics was its limited supply. Unlike fiat currencies, which can be printed to infinity by governments, Bitcoin has processes that keep its quantity finite. This is a desirable quality gold owners have been benefitting from for thousands of years.
However, cryptocurrencies ultimately fail the test of limited supply because there’s the potential to have an unlimited number of cryptocurrencies in existence, which is the same as money printing. So, while Bitcoin itself has a finite amount, the potential number of digital currencies is unlimited. This isn’t the case when you consider all precious metals on earth.
While gold’s price history extends over decades, we only have 8 years’ worth of Bitcoin’s ups and downs. The cryptocurrency first surpassed gold’s price in 2013, but has struggled to compete with the yellow metal. Last week, Bitcoin was trading at about $1,150, an amount close to its all-time high when it dropped 20% overnight. While Bitcoin has profited many speculators, it’s not a saver’s vehicle to wealth protection. Peter explains:
“There’s a lot of volatility in Bitcoin, so you can certainly trade it as a trading vehicle. But as a long-term store of value, as a monetary substitute, I just don’t think it’s viable … I have no idea what, if any, value Bitcoin is going to have 5 or 10 years from now. It’ll probably have value 5 or 10 days from now. It may even have more value than it has now. But that is for speculative traders. That is not for savers who are looking for an alternative to the dollar or the euro or even the Chinese RMB. They should be looking at gold.”
Over its short lifespan, Bitcoin has already experienced some major issues with hacking into its exchanges. The Mt. Gox hack in 2014 and subsequent bankruptcy of the digital currency’s largest exchange, which saw $450 million worth of Bitcoin disappear or stolen by hackers and its owner charged with embezzlement. More recently, a man in Florida pled guilty to operating an illegal bitcoin exchange owned by an Israeli hacker.
Gold certainly has a mixed history of government seizures, and personal property theft isn’t unheard of. But physical gold is more secure overall. Goldmoney accounts are digital recordings of gold holdings, so they’re also susceptible to hacks. However, unlike the missing Bitcoin at Mt. Gox, the physical gold you own still exists. That’s because Goldmoney itself doesn’t serve as the counterparty for holding your gold. Peter explains:
“The counterparty isn’t Goldmoney. The counterparty is Brinks. Goldmoney doesn’t have your gold. They’re just facilitating your ability to transact with your gold. It’s stored at Brinks … There’s always counterparty risk when you store something with a third party. Is the risk high? No, I think it’s extremely low. Brinks is a very safe company and of course, they have insurance behind that as well.”
Diversifying Your Physical Gold
“I don’t tell people to keep all your gold at Goldmoney. You just keep some of your gold at Goldmoney.”
“Let’s say you’ve got 10% of your gold stored with a third party and you’ve got 90% stored safely and privately in your house. The gold you have at Goldmoney is your liquidity. That’s the gold that’s available for commerce. If you need to buy something, that’s the gold you use. You don’t use the coins that are in your safe. You use the grams of gold in your Goldmoney account.”
“Of course, Goldmoney’s not just for spending; it’s for earning too … If you provide a service, you can be paid in gold. If you sell products, you can accept payment in gold. You can allow your Goldmoney account to grow as you also use your gold to buy things that you need.”
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