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Gold, bitcoin, silver: our stores of value are changing

Gold, bitcoin, silver: our stores of value are changing


Venture capitalist Lou Kerner recently said that bitcoin will replace gold as a store of value – noting that it had already surpassed silver.


Bitcoin is often described as ‘digital gold’: a store of value and so-called safe haven asset. Over the course of 2018 we saw that narrative eroded as BTC’s price fell from $20k to just north of $3k.


Despite that, Venture capitalist Lou Kerner, founding partner of New York firm CryptoOracle, has reiterated his confidence that bitcoin will one day overtake gold as a store of value. Kerner notes that silver has a market cap of $50 billion. Bitcoin, at $60 billion, is already in second place. Despite its 80% drop in value, BTC is still worth more than all the silver in existence.


And, for this point in its lifetime, that’s probably a good comparison. Silver is known to be far more volatile than gold, with dramatic swings in value. (Gold itself, despite its reputation as a safe haven, isn’t exactly stable in price.) Bitcoin acts more like silver than gold – for now.


With an $8 trillion market cap, gold is still a long way ahead of bitcoin and will likely stay there for a while. It would take a 100x move to the upside before BTC threatens gold as the world’s #1 store of value. But that’s far from unlikely given the way that bitcoin has bubbled and bust so many times before, with each cycle ending higher than the last. Kerner is looking 20 years ahead, comparing bitcoin with the internet and other emerging tech. ‘There’s something called Amara’s Law, which is that the impact of all great technological changes is overestimated in the short run, but underestimated in the long run,’ he says.


Kerner also notes how gold has been used as the dominant store of value for 5,000 years but almost every other currency has gone to zero. Inflation erodes their value by design. The dollar has lost 96% of its value since the Federal Reserve took over the US banking system in 1913. Thus a significant proportion of bitcoin’s rise in value over the coming years will actually be driven by the falling real-terms value of the dollar.


Chances are that after the next market cycle, no one will doubt bitcoin’s place in history as a store of value. We just hope you’ll hold some for the long term. Your children and grandchildren will thank you.

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