Fund Manager: Bitcoin Will Help Make Gold Great Again (GLD)
Tom Reese
From Tyler Durden: The manager of Old Mutual Gold & Silver Fund, a precious metals fund with over $220 mln under control has said Bitcoin is “paving the way” for a global gold comeback. Speaking to Bloomberg in an interview published today, Ned Naylor-Leyland said that the marriage of Bitcoin and gold was essentially a logical one given the characteristics and remit of both.
“Bitcoin was explicitly designed to be digital gold,” he said.
As CoinTelegraph’s William Suberg notes, the fund, which began in April this year, is aiming to allocate up to five percent to cryptocurrency, creaming off profits from price upticks to reinvest back into gold and silver.
Naylor-Leyland is highly bullish on the concept going forward, echoing CME Group’s Chairman Emeritus Leo Melamed in his desire to bring discipline to the scene for investors.
“It’s about bringing the ownership of disciplined money into the modern world,” he continued.
As we previously discussed, the real importance of bitcoin is not making cheap, easy payments. It’s not a way of making fast payments. It’s not going to allow for microtransactions or all these other use cases that we’ve heard are important for bitcoin.
The most important thing that bitcoin offers is a new form of sound money outside the control of any authority or government in the world. And that is something very, very important for the world economy. Bitcoin is hard money as opposed to easy money.
Easy money refers to money whose quantity is easy to increase, in case there is an increase in demand for it. So if people move toward using copper as money, it is very easy for copper miners to increase the supply and bring the price back down, which will hurt the people who used copper as the store of value for their savings. So copper is bad as a store of value, because it’s easy to produce in response to an increase in demand.
Gold, on the other hand, is hard money because even if the price of gold goes up a lot, it is very hard for gold miners to increase the supply of gold in the world. It is hard to bring the value down. Therefore, gold serves as a good store of value in the long run. It’s a much better store of value than other forms of money over time.
Bitcoin is far closer to gold. It is a digital equivalent of gold.
Bitcoin’s supply is strictly limited. There will only ever be 21 million bitcoins. And the code that controls the issuing of the bitcoins is decentralized among thousands, tens of thousands of nodes that operate the bitcoin software. And if it were to change, it would need the majority agreement of everybody involved.
Since everybody involved has an interest in maintaining the monetary policy in a way that maintains the value of the money, it is highly unlikely that we’re going to witness any change in the monetary policy. Even technical changes, like changing the block size or various parameters, have been almost impossible to make in bitcoin.
It’s possible to make a copy of bitcoin, but it’s not possible to change bitcoin. There will always be some people that want to stick to the inflation schedule as it is. So the monetary policy of bitcoin is immutable, it isn’t going to change, and since the supply is strictly limited and the network is distributed and nobody can control it, we might just have the digital equivalent of gold.
This, I think, is an enormously important innovation, because it has many good properties that gold doesn’t have. It’s very easy to send across the world very quickly, and it’s much harder to confiscate than gold. Therefore, the possibilities are exciting for people who believe in the importance of sound money for society.
Look at the era of the classical gold standard, from 1871, the end of the Franco-Prussian War, until the beginning of World War I. There’s a reason why this is known as the Golden Era, the Gilded Age, and La Belle Epoque. It was a time of unrivaled human flourishing all over the world. Economic growth was everywhere. Technology was being spread all over the world. Peace and prosperity were increasing everywhere around the world. Technological innovations were advancing.
I think this is no coincidence. What the gold standard allowed people to do is to have a store of value that would maintain its value in the future. And that gave people a low time preference, that gave people the incentive to think of the long term, and that made people want to invest in things that would pay off over the long term.
With bitcoin, once you’ve started holding some bitcoin and you see it appreciate, you start understanding that there is a very high opportunity cost to spending, and you start thinking twice about spending frivolously.
Also, bitcoin matters for moving very large quantities and high amounts of value, particularly in transactions in which you’re trying to avoid censorship or economic inflation from the central bank. So as a store of value, this is what bitcoin’s importance is.
The SPDR Gold Trust ETF (GLD) fell $0.26 (-0.21%) in premarket trading Friday. Year-to-date, GLD has gained 11.88%, versus a 17.28% rise in the benchmark S&P 500 index during the same period.
