Gold bugs flinch as Grayscale campaign promotes bitcoin

The tongue in cheek advert shows gold bullion being lugged through a bustling city to demonstrate the benefits of bitcoin as digital gold for the digital age. The campaign will run throughout this year on US broadcast and cable networks, as well as social media and streaming services. Barry Silbert, CEO at Grayscale, says the Drop Gold promotion achieved 100,000 views in the first 24 hours of its release. It also received a strong response from the gold community, who are questioning this attempt to usurp gold, a reliable safe-haven asset for thousands of years.

Referencing Nixon’s dropping of the gold standard in 1971, the Drop Gold website argues that we’re living in a digital world, a new financial era where bitcoin is displacing gold. The implication being that allocating funds to gold is an investment in the past, whereas bitcoin represents the future. In response, the World Gold Council — an organization comprised of representatives from leading gold mining companies — has published a blog post asserting gold’s investment pedigree.

The post, written by Adam Perlaky, Manager of Investment Research at the World Gold Council, concludes, “We continue to acknowledge the innovation taking place in the cryptocurrency and blockchain spaces and believe there will be a role for this technology in the future. However, it is clear that cryptocurrencies are not a replacement for gold and gold should remain a component in all investment portfolios.”

A weightless asset

In contrast to the bars of bullion that spill over the streets in the advert, bitcoin is described by Grayscale as a “weightless asset” that can be “bought, sold and transferred as easily as a text message”, and is far more able to “meet the evolving needs of modern society”.

In an attempt to disprove this, the World Gold Council post does not address issues of weight, portability, or convenience, but focuses on the positives of gold’s well-established position in the financial system as a safe-haven asset with low volatility.

Bitcoin’s emerging use case as a practical store of value for countries in crisis is not mentioned, nor is the diminishing safe-haven appeal of gold, which has been noted by several market analysts over the last few years.

The post argues that gold has a well-understood role in an investment portfolio, an established regulatory framework, and low levels of volatility — all important factors to investors, but also characteristics that might be difficult to find in any nascent asset class, not just crypto assets.

The longer Bitcoin exists, the stronger the Lindy effect will become as more of the global population start to believe in Bitcoin’s potential. This is reflected in a recent survey by Blockchain Capital, which found that despite the bear market, bitcoin awareness, ownership, and propensity to purchase have all increased significantly since October 2017.

A golden publicity stunt

The Bitcoin vs gold argument is a heated debate with gold bugs and bitcoin believers some of the most passionate and committed investors in the world. Intriguingly, bitcoin and gold share some of the properties of ‘sound money’. Both are scarce, durable, verifiable and borderless. Gold has the advantage of a 3,000-year history as a valued monetary asset, while Bitcoin has a ten-year immutable blockchain.

However, Bitcoin has several advantages over gold. It is much easier to store, move, spend, and divide. In fact, a million dollars worth of bitcoin can be sent across the world almost as quickly and easily as you might send an email. In today’s digital world, that is a compelling proposition.

Regardless of the truth, a new debate about bitcoin has been sparked, especially among the gold community, suggesting the marketing campaign is already a success.

“Grayscale’s drop gold campaign is doing exactly what you’d want from a marketing perspective: triggering gold bugs and sparking debate,” tweeted bitcoin investor Tuur Demeester. “It moves the media focus away from payments to store of value, and asks: Will Millennials prefer bitcoin over gold?”