Schiff vs. Ammous: Tokenized Gold Trumps Bitcoin

Peter recently debated longtime Bitcoin proponent Saifedean Ammous to turn the usual Bitcoin-vs.-gold argument on its head. Rather than rehashing the old debate, he focuses on tokenized gold—specifically Tether Gold— and explains why a claim on real metal is a far better monetary proposition than a claim on nothing. He argues tokenized gold brings convenience to a historically sound store of value while Bitcoin rests entirely on speculative demand.

He opens by changing the frame of the conversation and naming his real target for scrutiny:

It’s nice to have an unbiased moderator for a change show. Anyway, I’m going to change it up just a little bit because I don’t really want to have a Bitcoin gold debate. I’ve done plenty of those. I want to have the Bitcoin Tether Gold debate. So I’m going to be talking about Tether Gold because Tether Gold is tokenized gold and Bitcoin is tokenized nothing.

Next he lays out his central critique of Bitcoin’s economics: there is no underlying user demand, only speculation, so the asset has no floor and could collapse if sentiment turns:

And so since there is no underlying demand for Bitcoin, because there is no actual user for Bitcoin, there’s no floor to it. I mean, Bitcoin could go to nothing; it could collapse. All the demand for Bitcoin comes from speculators. Speculators, people want Bitcoin because they think the price is going to go up. And if people stop believing the price is going to go up, then nobody wants it. And in case you guys haven’t noticed, the price ain’t going up; the price is starting to go down.

To make tokenized gold more than an academic point, Peter points out that gold is already moving in price and says tokenization solves the old friction of moving metal around the globe—so you can own a claim on gold stored in secure vaults without being a jeweler or physically transporting it yourself:

We are seeing the early stages of the death throes of the fiat monetary system; I think that is what is happening and gold is being remonetized and it will be replacing the dollar. Maybe you kind of miss my opening statement when you’re talking about how it’s hard to send your gold around the world—you don’t have to. … I don’t have to send my gold anywhere. I can just leave some of my gold with Tether in their vault in a mountain in Switzerland where it’s nice and safe; I don’t have to transfer the gold, I’m not a jeweler, I don’t need the gold to use it as a metal, I just want to use it as a medium of exchange.

He then drills into the math comparing Bitcoin’s unit structure and annual new supply against gold’s mine production to show why gold’s physical flow matters and how small Bitcoin’s new issuance is in comparison:

There’s 4,000 tons coming onto the market, new gold, worth about $700 billion. That’s about 8 million Bitcoin; that’s four times the average of the value of the new mining output over the past ten years. In order to maintain the price over the next year, you need to get four times the demand that you have on average over the last ten years. By comparison with Bitcoin, it’s only $12 billion of new output that’s coming in because we only have 0.8% inflation, so this means that the volume of new Bitcoin coming onto the market is 2% of the volume of new gold.

Finally, he ties the rise of tokenized gold to a simple monetary truth: fiat currencies are engineered to lose purchasing power, and new technology now removes the biggest barrier to using gold as money—convenience—making gold-backed tokens an attractive refuge from ongoing debasement:

The reason that people haven’t been using gold as money is because it hasn’t been as convenient; it’s much easier to use dollars or euros or yen or pounds. But the problem with those currencies is that they don’t store value by design, and now you have central bankers that are committed—they’re telling us that their goal is for our money to lose at least two percent of its value every year as a baseline. So I think more and more people are going to want to find an alternative to a rapidly depreciating currency. And now that you have blockchain and the type of technology that makes Tether Gold possible, we can make using gold more convenient so you can avoid having to lose purchasing power.

If you missed it, be sure to check out Peter’s latest appearance on the Verified Macro Report!