Gold, Silver And The
Crypto Currency Storm
By Dr. Jeffrey Lewis
Much controversy surrounds comparisons between
precious metals and the growing number of crypto currencies. In some ways an
ideological wedge has formed between hard asset investors and the most vocal of
electronic currency advocates.
While both investment options remain relatively sequestered from the mainstream
spotlight, they both offer fascinating perspectives for understanding the
ongoing monetary and financial crisis.
The rise of decentralized, anonymous, and freely traded electronic currencies
has worked its way into the technology and media.
While Bitcoin, is the poster child, having gained the most attention and
participation, there are nearly 100s of other much smaller currencies and more
being developed all the time.
The Rising Tide of Social Media
The culture of social media will continue to play a major role in the rise of
the some of the currencies. They represent another tier of commerce within a
media format that has the potential to foment revolution.
Most new forms of media are fairly easy to criticize. Social media has it's
problems. The inherent lack of privacy and a thin the line emerging between the
mainstream media's exploitation and the utility of delivering pertinent
information versus entertainment and therefore propaganda as an extension of
public relations and advertising.
The Currency of Social Media
Many of the newer e-currencies are introduced by directly leveraging social
media. Obviously they start of small, but many can be collected via sites that
offer coins for free. These so called crypto-faucets effectively seed new mine
production. Many are used as tokens given as reward or tip for posting
newsworthy or entertaining content on blogs, forums, or on other social media
Some see these techniques as a shadow of those used in promoting penny stocks
and almost all share significant and often wild price volatility.
Controversy almost matches
100s of new crypto currencies have been created. Many associated with the social
media phenomenon, yet they have not quite reached in to the mainstream in terms
of awareness, and especially adoption.
Early adoption - volatility
Bitcoin is just one of many and happens to be the most popular for now. In some
ways it is Naturally the focus of ridicule and criticism. Observers are quick to
compare its recent rise to a mania, and equally swift at pointing out its use in
the electronic black market.
Store of Wealth and Properties
The comparison between the relative "ideal" monetary attributes of the precious
metals versus crypto currency can be a divisive exercise. But when the
comparison in includes fiat currency, it becomes more compelling.
Finite Supply - precious metals and most crypto have a finite supply. The purest
will argue that precious metals are much more ubiquitous than often assumed, but
we simply don't have the energy or technology to efficiently identify and mine
metals from the ocean floor.
Portability - all three alternatives are generally portable, though for the
individual, moving large amounts of silver and gold to a certain extent can
become difficult or at least more costly.
Fungible - all three are fungible.
Non-forgeable - the fiat dollar is the only one of the three that is capable of
Divisible - all forms are essentially divisible.
Privacy - precious metals, but especially crypto currency are private in the
sense that ownership can be basically hidden.
Acceptance - the dollar and precious metals are widely accepted - though in the
developed world precious metals are more indirectly accepted. Crypto currencies
have yet to achieve significant acceptance and this is the major factor
preventing its widespread acceptance. Although the trend is likely to grow.
Confiscation and theft resistance - both precious metals and fiat currency are
relatively more susceptible at this point to theft and/or confiscation. The
technology and software code capable of breaking the cryptographic signature for
the newest electronic currencies is impressively difficult to come by.
Durability - by it's very nature, the dollar is the least durable of the three,
and relative lack of adoption and newness places makes durability and gray area
Acceptance is the key one key limiting factor separating crypto currency from
monetary status or store of value. It is hard to imagine widespread acceptance
given the barriers to acceptance. A certain amount of savvy, from technological
capability, to the infrastructure required for its spread.
Indeed, after a recent visit to South America, and interacting with the many of
the financial elite, it is clear that widespread adoption is some time away.
Nevertheless, social media could ultimately provide the trigger for fast
Relatively speaking, and while not necessarily a requirement for monetary
status, acceptance of precious metals certainly exhibits a robustness that
certainly crypto currencies and the fiat dollar (even as reserve currency) do
not possess based on time and tradition.
Policy also interferes with what could be a more widespread adoption, but
generally for the average man, the worker, there has been a severe lack of
ability to deal with any and all technological and competitive challenges.
Volumes can easily explode, and many of these currencies will see huge
percentage moves as more and more people searching for yield become aware.
Sadly, it is more likely that adoption of crypto currencies and/or the return to
monetary metals will be missed by the majority. The nature of the ongoing
financial crisis, and it's brittle fragility caused by the ignorance of risk
from the top down is such that money velocity will explode from a massive base
if paper currency creation
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