Bitcoin vs. Gold

WHICH MINER WILL CLAIM VICTORY?

May 29, 2021

By Daniela Cambone

They both plunge into the darkness… armed with their respective hardware, digging through the earth or ether, each hoping for treasures yet or never seen. And whether hunched over a screen in their South Carolina suburban garage or on their knees scraping at the soil in the sands of South Africa, they’re connected by one cosmic unifier… They are miners.

And what they’re mining for is both from utterly opposing universes but ultimately the same: money. Except one’s invisible as the other one shines. One has existed for less time than a middle-schooler, while the other drapes over five millennia.

Welcome to the bitcoin versus gold debate. No school versus old school. Digital versus Analog. It’s also two self-made billionaires with a lot to say…

The Great Debate: Behind the Curtain

If you haven’t seen Stansberry Research’s two-hour debate on YouTube – no worries. I’m here to take you behind the curtain and rehash the highlights. The piece features me moderating a discussion between Michael Saylor, CEO of MicroStrategy, carrying the crypto flag, while Lionsgate Entertainment founder Frank Giustra spoke on behalf of the gold bugs.

Michael evolved into a crypto folk hero by becoming the first CEO of a publicly listed company to convert a part of his company’s cash reserves into bitcoin. Meanwhile, Frank transformed investment bank Yorkton Funds into a global powerhouse of mining finance, and is the mastermind behind the creation of some of the world’s leading mining companies. Frank is also a serial entrepreneur, having founded Lionsgate Entertainment, Modern Farmer, and Domenica Fiore. He now dedicates most of his time to philanthropic work, most recently the Million Gardens Movement alongside Kimbal Musk.

In my 15 years as an investigative journalist, I’ve become very familiar with the precious metals market, and I’ve known Frank for close to a decade. He’s such a pivotal figure in that world, and he knew that I had interviewed Michael Saylor on multiple occasions, as Saylor is one of the biggest names in the crypto space.

Frank mentioned he was up for a debate with Michael, and vice versa, so I decided to pitch Michael the idea, which resulted in a series of calls followed by radio silence. I thought this debate wouldn’t happen.

Until one day, my Twitter exploded…

Michael tweeted a poll to his followers if they’d like to see him do this debate on Stansberry Research – and the Internet responded in a resounding way… an overwhelming, 90% vote for YES. Once we got the green light, we haggled around agreed-upon topics, and for most of it, I felt like I was mediating a very civil divorce proceeding.

And I’m proud of that civility, that we avoided two talking heads shouting over each other, which comprises nearly all of “news” content today. Listen, these two gentlemen have nothing to prove – they’re at the top of their respective games. They wanted to talk about these two assets, not just because they’re experts, but because they’re passionate about it all… And they want to inform investors worldwide.

In the context of the debate, Saylor was the Zen, existential philosopher, often seeming like he’s soliloquizing in a vacuum. When he speaks, it’s almost an act of non-violent offense, like Muhammad Ali shadowboxing alone in a ring.

Meanwhile, Frank is the direct, pragmatic one, and came prepared with very strong punches. But he balances his delivery with a lighter, more casual approach, peppering his comments with Game of Thrones and Madonna references. At the same time, Saylor’s straight-faced, almost like he’s just a conduit for the bitcoin gods.

Since the debate, so many people have reached out to me – even my hairstylist heard about it. The feedback has been overwhelming… precious metals expert Jim Rickards, broadcaster Max Keiser, even Shark Tank’s Kevin O’Leary. The Twitterverse is now asking that I moderate a debate with Elon Musk and Saylor next. It struck a chord with these powerhouses in the world of finance and everyday retail investors.

Since the pandemic, there’s been an uptick in the consumption and creation of financial content – people with idle time and money, reassessing their lives and careers, and looking to learn lessons in the stock market. And I love that.

A few years ago, I felt like most people wouldn’t even know who the Fed Chair is – but now everyone’s so embedded into the world of money. And with that, I want to keep this gold versus bitcoin conversation going because I want our readers to educate themselves as much as they can.

If you’re going to ask me who won the debate, you’re going to hate my answer… I feel like the audience was the winner (that includes you). And in meta-mining this historic conversation, I’m reminded that we’re all just looking for value in life. And hopefully, this content brings some to yours.

Bitcoin: Laying Down the Gauntlet

From the first spark of making fire, human civilization progresses through channeling energy. And to Michael’s point, money is energy.

Money is essentially a store of value and technology that allows us to trade that energy over time and space. And if you look at humanity’s monetary timeline, we’ve gone from commodities to the coinage of those commodities to notes represented by that money to fiat currency, and now? Cryptography as money.

Gold advocates say that gold is the ideal money, but Michael counters that it’ll be GODcoin…

Suppose an omnipotent being waved their hand to create a perfect bit of money. It would be a manifestation of Luca Pacioli’s double-entry accounting principles circa 1494 – with units infinitely divisible by trillions each, floating in a magic space, settling everyone’s trade’s instantly, perfectly: accessible anywhere in the universe, never losing any information.

And according to Michael, until GODcoin arrives, bitcoin is humanity’s next best bet.

Bitcoin’s the most efficient monetary system we’ve yet to implement successfully. It’s at over 21 quadrillion transactions a day, storing the value and providing security to everybody on the network, effectively for free after those transaction fees.

This crypto’s the most disruptive financial force this century. In just 12 years, it grew to $1 trillion in monetary value, beating out the growth of FAANG stocks in that window of time.

Everything’s digitized now – so why wouldn’t our money be?

Money is collapsing right now as inflation climbs, and we keep losing 1% of currency value every month. And according to Michael, gold’s not a solution… It’s not practical to distribute gold in small quantities to 5 billion people. But bitcoin can reach everyone, and it’s growing, spreading at more than 200% a year, adding 3 million users a week.

For Michael, gold is a 19th-century relic, a glorified antique for the elites. In his mind, it’s time to mint its inevitable digital successor.

Gold Open

Frank finds the all-or-nothing, zero-sum ideology of the gold and bitcoin camps disheartening, as he thinks the two sides agree on 90% of everything – but fall apart when it concerns which is better. He claims this divisiveness is indicative of the ultra-polarized cultural and political discourse that’s become the baseline for America in 2021.

That said, he’s not moving an inch on his argument.

In his words, gold is eternal (echoing Michael’s Godcoin position) – what once adorned Cleopatra’s clavicle could now be the jangly golden necklace you’re wearing. Gold is a time machine with touchpoints throughout human history. It’s inextricably linked to the international cultural fabric and the global monetary system.

Its stability as a store of value is vital in managing the central bank reserve currencies and providing protection against other fiat currencies. Central banks own 33,000 tons of gold, 20% of all the gold ever mined, and they’re furiously buying it every year – the same isn’t true for bitcoin. Its purpose is a store of value against inflation, the devaluation of currencies, and sharp equity downturns.

When asked about what makes bitcoin the better asset, Saylor got elemental, as he’s apt to do…

You can’t build a computer without silicon. You can’t construct a skyscraper without steel. You’re not going to survive if you don’t pick the right element. Crypto is the steel of the 21st-century economy.

He claims gold is an ideal ornamental metal – indestructible, malleable, pretty. But that doesn’t make it the perfect monetary asset. You can inflate it, counterfeit it, and it’s immobile. (Have you tried lifting gold bars before?)

Bitcoin transcends just being an asset – it’s a network and protocol: decentralized, permissionless, global, immutable, scarce, auditable, instantly transferrable, not seizable, highly divisible.

Gold has a half-life of 30 years, whereas bitcoin has a half-life of forever. As Michael likes to say, everything that gold can’t do, the crypto can.

Your mother could authenticate a bitcoin transaction instantly from her smartphone – it’s empowering billions of people and built right into Square and PayPal, allowing for transactions at the speed of light and looking to accelerate global commerce in the 21st century.

But Frank contends that bitcoin’s yet unproven as a payment method – it’s too volatile with no history. Yes, the crypto went through (and benefited) from the COVID-induced market dip last year, but as an asset, it’s never been through the stress test of staggering inflation or a proper financial crisis.

The 17th century Dutch Tulip Bubble, the Crash of 1929, late 1970s inflation, Black Monday of 1987, the Tech Bust of 2000, the Recession of 2008 – gold has always been there. The metal thrives in turbulent markets, and gold’s doubled since the last crash 13 years ago.

Both men seemed to fall in line with generational-conflict tropes in their discussion – framing the new player as “inexperienced” while claiming the older one lacks vision.

The Rules of Risk

Swaths of investors hesitate on bitcoin due to its volatility, and when it comes to risk between the two assets, Frank doesn’t even think it’s close. He believes viewing bitcoin as a risk-free asset is naive at best… If you fail to subsume the entire value of gold, you’re left with nothing. From Frank…

The crypto army tries to weave a narrative for a higher bitcoin price, convincing everyone that gold is worthless, seeking to seep all $12 trillion of the metal’s value into the crypto. In that way, you can justify a $500,000 bitcoin price or a $1 million bitcoin price. Otherwise, why would anybody pay $60,000 today without that target in mind?

Frank knows the real dangers angled at cryptos will come from governments and central banks. History shows that sovereign countries will go to militant lengths to protect their monopoly on currency, and in his mind, they will not tolerate a decentralized global currency.

They especially won’t tolerate it if we have a dollar crisis, which appears more of a reality each day. Unlike gold, bitcoin is a potential threat to the U.S. dollar and America’s reign of having the world’s reserve currency. And he thinks if enough people on Capitol Hill share this idea, legislation could arise that bans bitcoin, pushing the crypto back underground.

Frank also cites that if (when) war breaks out, gold’s the far safer option. It’s secure from cyberattacks on both the Internet and power grids, either of which would thwart bitcoin.

He also thinks the crypto isn’t as un-hackable as all its disciples claim it is…

If they can hack the U.S. Defense network with secret backdoors built into the hardware, who’s to say it can’t happen with bitcoin?

But Michael fires right back, pouncing on the bloody history of gold, rattling off everyone from Alexander the Great to Cortes to Nixon, noting that gold always invites violent asset seizures throughout human history.

He details that bitcoin security, transport, and auditing are nearly free. These processes are unregulated and egalitarian – everybody has the same rights. A person with $100 of bitcoin has the same security as $1 billion of bitcoin. The crypto safely stores your property in cyberspace, unseizable by force, encouraging peaceful negotiations rather than coercion.

Frank conceded the point that blood was spilled for gold but says that only proves his point that gold’s value is something worth fighting for and dying over. And who’s to say that by 2050, digital soldiers won’t be vying over bitcoin, with the casualties being personal data instead of human life?

Peaking Performances

When it comes to pitching bitcoin’s performance, Michael first decides to give an abbreviated history of gold. Two thousand years ago, gold represented nearly all of money – and it’s slid ever since. Today, the monetary value of gold is around $5 trillion, and the total store of value in the economy is $250 trillion, i.e., gold is roughly 2% of all money.

Michael claims gold peaked this past August 10 – not coincidentally around the time he and his company MicroStrategy announced they bought $250 million bitcoin.

In his mind, if he had chosen gold at that moment, he’d be down billions today over nine months versus bitcoin – a $4 billion choice. And he believes he chose wisely.

While he admits bitcoin’s first decade was legendarily volatile, he believes the asset has matured, and the network has spread. The crypto’s growing up! He likens it to Lebron James at age 19. The best player is always the most volatile.

Frank responds strongly, noting that to grasp the heights of gold’s performance, you must understand how well it fares during high inflationary periods, e.g., in the 1970s, gold shot from $35 to $850. And when the pandemic hit last year, gold had a big initial dip down, but then central banks and jewelers swooped in and bought big.

And when it comes to bitcoin’s performance, Frank again highlights its fledgling status, claiming that a mere 10-year history isn’t enough time to determine how well it will do in the future. In his estimation, he doesn’t see why anybody would invest in bitcoin if their objective is to preserve value.

Supply (Block)Chains

The crypto kings will always make the scarcity argument that bitcoin’s capped at 21 million coins whereas humanity’s constantly stumbling upon more gold. But Frank wants to clarify the gold mining industry as he thinks most people (including Michael) don’t grasp it.

The average period between discovery and production of the metal is 10 to 20 years. And the grades are getting lower, becoming more costly and time-consuming to find these lesser-quality deposits. According to Frank, no one’s made a world-class gold discovery in the last 30 years.

And he illustrates how mining production does and doesn’t affect the price of gold. In 1971, the global production of gold by mining companies was 1,500 tons, and gold was $35 an ounce.

Scroll forward 50 years: Gold’s price has shot up 50-fold, 6,000%. The uptick in production in that time? It’s only doubled.

But in Michael’s mind, gold’s not a scarcity – it’s a glorified commodity. As the price goes up, the supply is constant. And he claims that all commodity businesses need a cartel to be stable, rattling off the Rockefellers, OPEC, and De Beers as exemplars.

He says as gold’s price rises, its miners increase output, which weakens the jewelry demand – then bankers sell short on gold derivatives while investors fund more mining expansion. Miners then sell more gold, and ultimately the price gets so high the government stops buying gold.

Then the metal’s sold or shorted, and its price drops.

“That’s the problem with having 90 kilotons worth of gold as jewelry and so many tons of gold sitting in central banks. It’s a damping feature.”

On the crypto side of supply-and-demand, Michael says investors and companies buy bitcoin, but banks and governments can’t short it – because they don’t have it.

They then take eco-conscious shots at each other…

Michael reminds us that gold mining requires $100 billion a year in fossil fuels, labor, chemicals, and environmental damage in the never-ending struggle to inflate the gold supply and undermine the price.

But Frank fires back, noting that the energy consumption bitcoin mining saps up is the same as the entire population of Nigeria.

It’s safe to say neither gold or bitcoin mining is the best for the environment, which makes one wonder why humanity’s harnessing of wealth almost always comes at the expense of the Earth.

Market Forces and Who Owns What?

When it comes to owning these assets, both men fired at each other with accusations of speculative behavior. Michael even quoted Frank to Frank, citing his foil’s following, “What I do best is create and build mining companies. 10% of your portfolio should be in gold. Gold won’t keep going up forever. And rotate out of gold following the panic buy.”

He followed that quote with another Peter Schiff nugget… “I don’t own much gold. I own more gold stocks – and a lot of gold companies don’t even have gold.” Michael claims these gold-mining behemoths are expiration companies trying to find their speculations. With $11 billion in revenue, Newmont Mining has $5.5 billion in cash. EBITDA of $5.7 billion last year paid a massive dividend of $1.45 billion.

“Gold miners don’t have any gold on their balance sheet. They could borrow $20 billion at 3% interest and buy gold if they believed in it. They don’t believe in it. Talk about hating gold.”

In terms of charges that bitcoin is speculative, Michael’s rebuttal is that anyone with that take is a Luddite.

“Technology spreads virally because it is a better idea – Uber, WhatsApp, iPhone, YouTube, Netflix – they all spread virally. People tell their friends because it’s a good idea.”

On the other side, Frank points out the disparity in crypto ownership (seemingly echoing America’s economic inequalities), noting that 2% of owners have 95% of all the bitcoin value.

And Frank reiterated his point about gold’s resilience in dire economic times. When COVID hit in March of 2020, gold took an initial 8% hit as the markets dipped that month, but the asset recovered, breaking even. He points out that bitcoin simultaneously dropped 25%, and bluer financial skies only returned this past October.

Michael waves this off and jumps into this pitch…

The significance is any finance, insurance, or mutual fund company can 10 times the value of their traditional offering by injecting bitcoin into it. And then any big tech company can become a bank. How explosive is this? Well, I think we’ll see 150 new holders this year. I think you’ll see $500 billion of assets flow onto the network this year.

He mentions that crypto-friendly PayPal, Square, and Coinbase alone have a $500 billion market cap combined. And there are top bitcoin drivers in Wall Street and Silicon Valley: Morgan Stanley and Goldman Sachs to Apple and Amazon.

Michael contrasts this landscape with gold market forces, claiming Frank’s industry continues to market the myth of gold as money while mining in an expensive, dirty, dangerous fashion.

It was clear at this point (if it wasn’t already) that neither of these men would change the other’s mind.

The Mic Drop

When it came to closing remarks, Michael was undeniably on-brand with a Game of Thrones Live Action Role Playing (“LARP”) metaphor…

If we contrast the golden knight with the bitcoin dragon, the golden knight’s got a 30-year life. It’s plodding, stupid, heavy, predictable, and stagnant. And he’s up against the immortal bitcoin dragon: teleporting, dematerializing, hyperintelligent, rapidly evolving, moving at the speed of light.

He then pivots back to numbers, restating that gold bugs always advocate having 10% of physical gold in one’s portfolio to protect against a crash.

Which brings him back to his refrain: what about the other 90%? Again, he views bitcoin as the solution and gold as nothing but an obsolete hedge. And then he quotes General Patton (naturally):

“Nobody’s ever defended anything successfully. There’s only attack and attack and attack some more. Gold is defense. Bitcoin is an offense.”

Michael ends it by projecting his crypto’s growth, noting that bitcoin spreads at 200% a year. He claims it will reach 250 million people by the end of 2021 and soon… everyone.

Frank fights back at the rosy crypto eutopia Michael and his ilk push, scolding him for potentially leading young, naive investors astray. He thinks the whole bitcoin community smacks of a digital cult. And he returns to one of his core arguments, the idea that billionaires holding cryptos may make a killing, but it’ll leave millions of smaller investors as casualties.

“In Michael’s world, all you own is bitcoin. That’s the only asset class you own. And that’s not the way that you’re going – it’s just never going to happen in the real world. It’s sheer fantasy.”

Frank offers these words of caution: if you want to buy bitcoin, so be it, but you have to own gold as your insurance.

And that utterance encapsulates the obvious eureka moment… You don’t have to pick the metal over the crypto. Even though most Americans (or investors) are allergic to this concept, it’s possible to have two opposing ideas in your head at once.

Think of the two assets as Batman and Joker – they need each other. Which is to say, don’t pick bitcoin or gold.

Choose both.

Daniela Cambone is an editor-at-large and media anchor for Stansberry Research. Daniela is a veteran journalist, having covered financial markets for well over a decade. Before joining Stansberry Research, she was the editor-in-chief and lead anchor for Kitco News, covering global markets, economic news, and commodities. Her work was simultaneously featured and covered on Jim Cramer’s TheStreet.com, Forbes, Yahoo Finance, and MSNBC.