Gold, Silver and the Gathering Crypto Currency Storm

gold and silver

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.

Crypto Storm

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 channels.

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 being forged.

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 for e-currencies.

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 adoption.

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.

Money Velocity

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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