Powell Says Bitcoin is “Just Like Gold.” Except It’s Not

Jerome Powell recently told reporters that Bitcoin is “like gold—only digital.”

He said:

“People use bitcoin as a speculative asset. It’s like gold, it’s just like gold — only it’s digital. People are not using it as a form of payment or a store of value…It’s highly volatile. It’s not a competitor for the dollar; it’s really a competitor for gold. That’s really how I think about it.”

Powell’s attempt to compare Bitcoin to gold is not only misguided, it’s an insult to the very principles that sound money stands for. This is a classic case of reducing gold, the bedrock of economic stability, to the hollow, speculative circus that Bitcoin represents.

Powell says people use Bitcoin as a speculative asset. He’s right on that front, except that it isn’t really an “asset” at all. Bitcoin’s entire existence hinges on a glorified guess about the future, with no actual backing or tangible worth other than an industry of “miners” who, by using more powerful computers than everyone else, harvest Bitcoin from the ether. To make matters worse, scores of miners go bankrupt every four years as their Bitcoin discoveries are slashed in half by a “halving” event that cuts by 50% the supply of newly-minted Bitcoin. This programmed-in bankrupting of miners is supposed to reinforce Bitcoin’s “scarcity.”

People aren’t using it as a currency, either, and it’s too volatile and uncertain to be considered a store of value. If a small handful of the biggest “whales” — the largest holders of Bitcoin — could sell their holdings and crash the price, is that a dependable place to store your wealth? It’s a “store of value” only as long as you’re in a market that is flooded with irrational speculators willing to bet their savings on a digital mirage, and none of the first-generation “holders” decide to dump their coins.

This is an asset that routinely loses 50% or more of its value. One moment it’s the latest “store of value,” and the next, it’s plummeting harder than a stock on Black Thursday. Is this computing experiment, dependent on the Internet, the foundation of a reliable currency or store of wealth?

Unlike Bitcoin, which can lose half its value overnight based on memetic trends, engineered mining busts, and capricious “whales,” gold has been the pillar of financial stability since 600 BCE. It’s not reliant on a computer algorithm or the latest technological advancement to maintain its value. Gold’s worth is based on its inherent qualities—scarcity, durability, and its long history as money.

Gold 100-Year Chart

Bitcoiners argue that gold is slow and expensive, but in the Bitcoin ecosystem, fees can get so high that sending small amounts becomes totally unfeasible. Even prominent Bitcoiners themselves have warned that this will render millions of small-fry holders unable to do anything with their precious orange tokens.

Other times, Bitcoiners trying to avoid high fees have even had their transactions trapped for weeks in the “mempool,” stranded without any miner willing to validate it and push it through the network. Unable to scale, most of the “decentralized” Bitcoin network will ultimately have to rely on third parties and second layers in order to actually buy, sell, or even move their pieces of alleged digital value, rendering totally moot the Snowdenesque cypherpunk dream of infinitely transferable, private, peer-to-peer “digital cash.”

Misunderstanding UTXOs will lead to problems with spending your #Bitcoin    in the future.

Transaction fees are low – consolidate your UTXOs!

UTXO management for beginners:

(THREAD 👇) pic.twitter.com/CiaJvobRb2

— Rajat Soni, CFA (@rajatsonifnance) February 6, 2024

Gold doesn’t require a stable internet connection, and it doesn’t need a “mining” network to keep it intact or secure. You can hand a single gram of it to another person without that same gram being eaten into a black hole of fees. And when instability reigns, you can bet your last dollar—or ounce of gold —that your holdings will retain their purchasing power. It’s a commodity that is universally recognized, universally trusted, and universally valuable. Bitcoin, on the other hand, is a digital concoction with no inherent value, subject to whims of sentiment, techno-dependence, and dominant market participants who can fleece long-term “holders” who think their bitcoin will someday buy them the world.

The Austrian school believes that sound money must be scarce, durable, and reliable, none of which apply to Bitcoin. Yes, Bitcoin is scarce—at least in the sense that there will only ever be 21 million of them. But a 21 million cap doesn’t make Bitcoin trustworthy or scarce. Bitcoin is pseudo-scarce, where there are endless shiny imitators. And unlike a piece of gold, a piece of bitcoin can be further divided ad infinitum. The natural rarity of gold, combined with its historical utility and inherent value, makes it the only real contender for sound money.

Gold is inherently scarce by nature, and it has survived as the backbone of stable monetary systems for millennia. Gold cannot be debased like fiat currencies, nor can it be manipulated like Bitcoin or ended by a single early adopter dumping their stash and causing the music to stop — or just selling and re-buying over and over again, harvesting profits from suckers in an endless loop of scammery.

Gold doesn’t rely on the latest app or mining protocol to prove its worth. It doesn’t need a regulatory framework to prop it up. Bitcoin may have been hyped as the “future of money” by a small band of digital evangelists, and that seemed more likely in the early days. But now, “stateless money” is becoming statist as parasitic Wall Street banks, large corporations, and nation-states embrace it, ironically, with dollar signs in their eyes.

Just take MicroStrategy, borrowing money to buy massive amounts of Bitcoin. Now one of the biggest buyers, the company’s scheme is like a Matryoshka doll of fiat Ponzis. As Peter Schiff recently said on his podcast:

“…their whole business model depends on pushing up the price of Bitcoin and borrowing money to do it. The minute they run out of the ability to borrow money, the whole thing collapses—because they are the big buyers. And without them, this whole thing collapses.”

Besides, Powell contradicts himself. If Bitcoin is “just like gold,” and Bitcoin isn’t a store of value, then gold isn’t a store of value either. But if that’s the case, why do central banks buy and hold gold in their vaults? Why does the US Treasury hold gold? What would be the point? If Jerome were correct, or if he were telling the truth, the US would be selling all its gold. But it isn’t.

Gold is the cornerstone of financial stability, the bedrock of sound money, and the one true asset that holds its value over time. Bitcoin is a speculator’s gamble that has no place in the world of sound economics.