The actual turbulence caused by the corona virus shed light again on the SoV function of crypto-currencies. They show high volatility compared to gold – the one asset they want to beat on its turf. One should always keep in mind that in crypto’s main function as a means of payment (currency) without intermediary they remain unmatched. In times of increased border and capital controls in failing economies, crypto-assets can prove their usefulness to people trying to survive.
Store of value would be nice, yet: The marketing of functioning features instead of conjuring up non-functioning ones has never harmed any product.
The world’s most important safe haven asset is no different when it comes to specifying its functions.
The gold-solidus illustrated this dilemma like no other coin. For over a thousand years it was mainly used to pay the wages of Roman legionnaires (no modern currency can compete with a lifespan this long). However, even in those “golden” ages, it was impossible to use the smallest gold coin denomination for everyday purchases. It was simply worth too much, so even then it was mostly exchanged for silver.
Today one gram of gold currently costs about $51, smaller denominations are not only unusual but virtually non-existent.
So how likely is it to get gold as change when paying for the proverbial loaf of bread?
If bimetallism was still in place, you’d get your bread plus 100g of silver back when paying with 1g of gold (Gold/Silver ratio being at around 101).
The combination of both assets, however, solves their individual problems:
Gold as a store of value and crypto as a medium of exchange are so complementary to each other that with the help of Crypto / Gold trading platforms it seems to be only a matter of time until they can replace FIAT currencies that follow a self liquidating path by ever growing government interventions. Gold & crypto are both ready in the starting blocks to help shape the future of payments by complementing each other – creating a new form of bimetallism.