One of the major selling-points – a unique selling point (USP) if you like – of Bitcoin is its promise that supply will be limited. Supposedly just 21 million coins will ever be created; as of August 2021, 18.77 million have been mined. The origins of Bitcoin are fairly well-known; the first two developers were Satoshi Nakamoto, a mysterious figure whose existence has been questioned and Martti Malmi, a Finnish software engineer. According to Bitcoin.org, “Bitcoin is controlled by all Bitcoin users around the world… nobody owns the Bitcoin network… nobody can speak with authority in the name of Bitcoin”.
Limited supply, controlled by no individual or group, virtually indestructible, highly valued and used as a form of money… that’s gold! But all those qualities are also aspired to by Bitcoin (and other forms of computer-created digital tokens). No-one seems to agree what Bitcoin actually is: the US Treasury categorises Bitcoin as a decentralised virtual currency; the Commodity Futures Trading Commission classifies it as a commodity; the Internal Revenue Service classifies it as an asset. For some, notably former US Presidential hopeful Hillary Clinton, Bitcoin is a threat to the US Dollar’s reserve currency status and “has the potential” for destabilising nations.
Yet if one of Bitcoin’s USPs is its inherent scarcity – which could be overturned if all Bitcoin network users agreed – then surely that’s one of gold’s USPs too. And even though people might long for more gold to be produced, that longing counts for nothing – especially in a world which is inexorably moving against environmental depredations of any kind.
Virtually indestructible, almost all of the gold that has been mined is still around. The World Gold Council (WGC) estimates that total above-ground gold stocks are around 201,000 tonnes, and 53,000 tonnes are under the earth. Jewellery accounts for 46% of the above-ground stock, says the WGC, official holdings 17%, private investment 22%.
If the current rate of production continues at around 3,000 tonnes a year, then known underground gold reserves will run dry in 17.6 years. Of course new gold reefs could be discovered, although in the last three years none have been found. According to S&P Global Intelligence in June 2020, “with production from existing mines expected to begin decreasing in 2022, there is a need for more high-quality assets that can be developed in the medium term”.
One source of additional gold supply is unavailable to Bitcoin – recycling. If new gold supply begins to slow, then the law of supply and demand should hold true – and the price ought to rise. That may encourage some holders of physical gold to sell, which would increase supply. But when prices are going up, the temptation is to hold on for future further gains.
When 21 million Bitcoins have been mined, and if the promises of Bitcoin’s fans hold true (that its price will skyrocket) then its ‘community’ will be sorely tempted to mine more; and fraudulent Bitcoins and Bitcoin scams will become more commonplace. The supply of cryptocurrencies is theoretically unlimited. Bitcoin is currently the favourite; will it always be?
With Glint’s allocated gold, you know your money is safe. While the world tries to figure out what Bitcoin actually is, we have centuries of history that have established gold as money.
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