Is Bitcoin really going to beat gold?


Let’s try and answer this question with the three facets of currency learned from Econ 101:

1. medium of exchange

2. unit of account

3. store of value

K then…

Long thesis:

qualifies as a currency:

  • medium of exchange (check) more and more people accept bitcoin as a payment, especially for large cash purchases
  • unit of account (check) can be unlimitedly small in theory
  • store of value (check) defined as digital gold

as a digital gold, has stronger anti-inflation ability than gold itself

  • gold is relatively unlimited but bitcoin is limited to 180k, you can’t print more bitcoins but in theory you can mine more golds on earth or in the universe if you want
  • global gold market cap: ~$11.56T, bitcoin $886B, ~8% of total gold market value, meaning ~10x of current price $52210

higher potential than gold because it can be used for mega trades

  • buying a Tesla, a house, etc.

Short thesis:

  1. volatility. It’s too volatile to be a currency, people cannot use a highly volatile asset to trade (medium of exchange); also, too volatile to keep our money’s value (store of value)
  2. security. too many accounts are being hacked
  3. consolidation. there are too many crypto currencies here and literally everyone can be today’s bitcoin one day, if the entire industry’s story is consolidation then bitcoin’s anti-inflation ability would be just a joke
  4. technological deficiency. too early to say it’s a good, trustworthy one. bitcoin can process only several millions of transactions in 1s while Alipay, Mastercard, Visa can process several ’00 billions of transactions in 1s (the data might not be that accurate but you know what I mean)

In summary:

it’s all about how much gold bitcoins are worth

  • upside case: ~10x growth, a valid currency (medium of exchange esp. large amount transaction, unit of account, store of value esp. it did go up recently), more inflation-proof than gold (we’ll see)
  • downside case: rally back to ~1200, worse-than-expected payment tech, too volatile to hold value, with technically unlimited supply of other cyptocoins
  • base case: 3–4x growth no big problem